Exhibit 2.1
MERGER AGREEMENT
AMONG
VITRIX, INC.,
VITRIX INCORPORATED,
TIME AMERICA, INC.,
AND
THE UNDERSIGNED SHAREHOLDERS OF TIME AMERICA, INC.
DATED MARCH 28, 2001
TABLE CONTENTS
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ARTICLE 1................................................................. 2
1.1 The Merger ..................................................... 2
1.2 Effect of the Merger ........................................... 2
1.3 Consummation of the Merger ..................................... 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers ... 2
1.5 Conversion of Securities ....................................... 3
1.6 Closing of Company Transfer Books .............................. 3
1.7 Exchange of Certificates ....................................... 3
1.8 Dissenting Shares .............................................. 4
1.9 Tax Consequences ............................................... 5
1.10 Taking of Necessary Action; Further Action ..................... 5
1.11 Stock Options .................................................. 5
ARTICLE 2................................................................. 5
2.1 Organization and Qualification ................................. 6
2.2 Authority Relative to This Agreement ........................... 6
2.3 Capital Structure .............................................. 6
2.4 SEC Filings; Financial Statements .............................. 7
2.5 Valid Issuance ................................................. 7
2.6 Accuracy of Information ........................................ 7
2.7 Title to Properties ............................................ 8
2.8 Accounts Receivable ............................................ 8
2.9 Employment Matters ............................................. 8
2.10 Affiliate Transactions ......................................... 8
2.11 Compliance with Laws; Permits; Certain Operations .............. 9
2.12 Non-Contravention; Consents .................................... 9
2.13 Brokerage ...................................................... 10
2.14 No Material Adverse Changes .................................... 10
2.15 Legal Proceedings .............................................. 10
ARTICLE 3................................................................. 10
3.1 Organization and Qualification ................................. 10
3.2 Authority Relative to this Agreement ........................... 11
3.3 Capitalization ................................................. 11
3.4 Financial Statements ........................................... 12
3.5 No Subsidiaries ................................................ 12
3.6 Absence of Undisclosed Liabilities ............................. 13
3.7 No Material Adverse Changes .................................... 13
3.8 Absence of Certain Developments ................................ 13
3.9 Title to Properties ............................................ 15
3.10 Accounts Receivable ............................................ 16
3.11 Inventories .................................................... 16
3.12 Tax Matters .................................................... 17
3.13 Contracts and Commitments ...................................... 19
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3.14 Proprietary Rights ............................................. 21
3.15 Litigation ..................................................... 22
3.16 Brokerage ...................................................... 22
3.17 Employment Matters ............................................. 22
3.18 Employee Benefit Plans ......................................... 23
3.19 Insurance ...................................................... 24
3.20 Affiliate Transactions ......................................... 25
3.21 Suppliers ...................................................... 25
3.22 Officers and Directors; Bank Accounts .......................... 25
3.23 Compliance with Laws; Permits; Certain Operations .............. 25
3.24 Disclosure ..................................................... 26
3.25 Non-Contravention; Consents .................................... 26
3.26 Stockholder Vote Required ...................................... 27
3.27 Environmental and Safety Requirements .......................... 27
3.28 Securities Matters ............................................. 27
3.29 Accounting Matters ............................................. 29
ARTICLE 4................................................................. 30
4.1 Conduct of Business Pending the Merger ......................... 30
4.2 Notification; Updates to Disclosure Schedule ................... 32
ARTICLE 5................................................................. 33
5.1 Shareholders Meetings .......................................... 33
5.2 Expenses ....................................................... 33
5.3 Additional Agreements .......................................... 33
5.4 No Negotiations, etc ........................................... 33
5.5 Notification of Certain Matters ................................ 34
5.6 Access to Information; Confidentiality ......................... 34
5.7 Shareholder Claims ............................................. 34
5.8 Consents ....................................................... 34
5.10 Notification; Updates to Vitrix Disclosure Letter .............. 35
5.12 Commercially Reasonable Efforts ................................ 35
5.13 Tax Matters 35
ARTICLE 6................................................................. 39
6.1 Conditions to Obligations of Each Party To Effect the Merger ... 39
6.2 Additional Conditions to Obligation of the Company ............. 41
6.3 Additional Conditions to Obligations of Vitrix ................. 42
ARTICLE 7................................................................. 44
7.1 Termination .................................................... 44
7.2 Termination Procedures ......................................... 45
7.3 Effect of Termination .......................................... 45
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ARTICLE 8................................................................. 46
8.1 Amendment ...................................................... 46
8.2 Waiver ......................................................... 46
8.3 Public Statements .............................................. 46
8.4 Notices ........................................................ 46
8.5 Interpretation ................................................. 47
8.6 Severability ................................................... 47
8.7 Miscellaneous .................................................. 47
8.8 Non-survival of Representations and Warranties ................. 48
8.9 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership ........................................... 48
8.10 Fax Signatures ................................................. 48
SCHEDULES
Schedule 1.4 Officers and Directors of Surviving Corporation
Schedule 1.5(a) Shareholder Ownership
PARENT DISCLOSURE SCHEDULES
Schedule 2.7 Liens
Schedule 2.13 Brokerage
COMPANY DISCLOSURE SCHEDULES
Schedule 3.2 Authority Relative to this Agreement
Schedule 3.3(d) Repurchase of Stock
Schedule 3.3(e) Registration of Securities
Schedule 3.3(f) Repurchase Obligations
Schedule 3.6 Undisclosed Liabilities
Schedule 3.7 Adverse Changes
Schedule 3.8 Certain Developments
Schedule 3.9(a) Liens
Schedule 3.9(b) Real Estate
Schedule 3.9(c) Leases
Schedule 3.11 Inventory
Schedule 3.12 Tax Matters
Schedule 3.12(d) Tax Returns
Schedule 3.13(a) Contracts
Schedule 3.13(b) Breach of Contract
Schedule 3.14 Proprietary Rights
Schedule 3.15 Litigation
Schedule 3.16 Brokerage
Schedule 3.18(a) Pension Plans
Schedule 3.18(b) Welfare Plans
Schedule 3.18(c) Compensation Programs
Schedule 3.18(j) Extended Benefits
Schedule 3.19 Insurance
Schedule 3.20 Affiliate Transactions
Schedule 3.21 Suppliers
Schedule 3.22 Officers and Directors; Bank Accounts
Schedule 3.23 Compliance with Laws; Permits; Certain Operations
Schedule 3.25 Non-Contravention; Consents
Schedule 3.29 Accounting Matters
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MERGER AGREEMENT
This MERGER AGREEMENT is dated March 28, 2001 (this "Agreement"), by and
among Vitrix, Inc., a Nevada corporation ("Parent"), Vitrix Incorporated, an
Arizona corporation wholly owned by Parent (the "Merger Sub"), Time America,
Inc., an Arizona corporation (the "Company"), and the shareholders of the
Company listed on Schedule A hereto (each a "Shareholder" and, collectively, the
"Shareholders").
RECITALS
WHEREAS, Parent and certain of the Shareholders are parties to a letter of
intent dated January 30, 2001 (the "Letter of Intent"), which contemplates the
merger described in Article 1 (the "Merger").
WHEREAS, the respective boards of directors of Parent and the Company have
determined that it is advisable to consummate the Merger, as a result of which
all of the outstanding common stock, no par value per share, of the Company
("Company Common Stock") will be converted into shares of the Common Stock,
$.005 par value per share, of Parent ("Parent Common Stock") and the Company
will be merged with and into Merger Sub;
WHEREAS, for federal income tax purposes, the parties intend that the
Merger shall qualify as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder;
WHEREAS, for accounting purposes, the parties intend that the Merger shall
be accounted for as pooling of interests;
WHEREAS, all annexes, disclosure schedules, exhibits and other attachments
hereto are incorporated herein by reference and, taken together with this
Agreement, including the foregoing Recitals, shall constitute but a single
agreement; and
WHEREAS, the parties wish to set forth certain other agreements among them.
NOW THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
The respective boards of directors of Parent, the Merger Sub and the
Company have, by resolutions duly adopted, approved the following provisions of
this Article 1 as the plan of merger required by the laws of the State of
Arizona in connection with the Merger:
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3), in
accordance with this Agreement and applicable law, the Company shall be merged
with and into the Merger Sub, the separate existence of the Company (except as
may be continued by operation of law) shall cease, and the Merger Sub shall
continue as the surviving corporation under its current name "Vitrix
Incorporated" as provided in the Articles of Incorporation of the Company
pursuant to Section 1.4 of this Agreement. The Merger Sub, in its capacity as
the corporation surviving the Merger, sometimes is referred to herein as the
"SURVIVING CORPORATION."
1.2 EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of the Parent and the Company (collectively, the
"CONSTITUENT CORPORATIONS"); and all property, real, personal, and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
other chooses in action, and all and every other interest of or belonging to or
due to each of the Constituent Corporations, shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the Surviving Corporation shall be responsible and liable for all
liabilities and obligations of each of the Constituent Corporations.
1.3 CONSUMMATION OF THE MERGER. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Squire, Sanders & Dempsey L.L.P., 40 North Central Avenue, Suite 2700,
Phoenix, Arizona 85004 at 10:00 a.m. on a date to be mutually agreed upon by
Parent and the Company, which date shall be no later than the third business day
following the satisfaction or waiver of the conditions set forth in Article 6 of
this Agreement (the "SCHEDULED CLOSING TIME") and no later than the Final Date
(as defined in Section 7.1). The date on which the Closing actually takes place
is referred to in this Agreement as the "CLOSING DATE." On the Closing Date, the
parties hereto will cause articles of merger relating to the Merger to be
delivered to the Secretary of State of the State of Arizona in such form as
required by, and executed in accordance with, the relevant provisions of
applicable law. The Merger shall be effective at such time as such articles of
merger are duly filed with and accepted by the Secretary of State of the State
of Arizona in accordance with applicable law (the "EFFECTIVE TIME").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation and Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation and Bylaws
of the Surviving Corporation immediately after the Effective Time and shall
thereafter continue to be its Articles of Incorporation and Bylaws until amended
as provided therein and under the applicable law. The directors and officers of
the Surviving Corporation immediately following the Effective Time shall be the
persons identified on SCHEDULE 1.4 attached hereto.
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1.5 CONVERSION OF SECURITIES. Subject to Sections 1.7(b) and 1.8, at the
Effective Time, the following events shall occur by virtue of the Merger and
without any action on the part of the Merger Sub, the Company or the holder of
any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 1.5(b)) shall, without any action on the part of the
holders thereof, automatically be canceled and extinguished and the total
number of outstanding shares of Company Common Stock shall be converted
into and become a right to receive an aggregate number of shares of Parent
Common Stock determined as set forth in the following sentence (the "SHARE
CONSIDERATION"), payable to the Shareholders on a PRO RATA basis in the
manner reflected on SCHEDULE 1.5(A) attached hereto. The actual aggregate
number of shares of Parent Common Stock constituting the Share
Consideration issued by Parent, will be a number of shares resulting in the
Shareholders collectively owning fifty percent (50%) of Parent after giving
effect to the issuance of the Share Consideration.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and held in the treasury of the
Company shall automatically be canceled and extinguished and no payment
shall be made with respect thereto.
(c) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase
option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company,
then the shares of Parent Common Stock issued in exchange for such shares
of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends.
1.6 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
Shareholders shall cease to have any further rights as shareholders of the
Company, and the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall thereafter be made.
1.7 EXCHANGE OF CERTIFICATES.
(a) At the Closing, the Shareholders and the Company shall deliver to
Parent stock certificates evidencing all the Company Common Stock, each in
form suitable for transfer, endorsed in blank or with executed blank stock
transfer powers, along with stock book, stock transfer ledger, minute book
and any corporate seal of the Company. Upon the surrender and exchange of a
certificate theretofore representing shares of Company Common Stock, each
Shareholder shall be issued a certificate representing the number of shares
of Parent Common Stock to which such person is entitled pursuant to Section
1.5(a), and the certificate theretofore representing shares of Company
Common Stock shall forthwith be canceled. Until so surrendered and
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exchanged, each certificate theretofore representing shares of Company
Common Stock shall represent solely the right to receive Parent Common
Stock into which the shares it theretofore represented shall have been
converted pursuant to Section 1.5(a), and the Surviving Corporation shall
not be required to pay the Shareholder thereof Parent Common Stock to which
such Shareholder otherwise would be entitled; provided that procedures
allowing for payment against lost or destroyed certificates against receipt
of customary and appropriate certifications and indemnities shall be
provided. All certificates of Parent Common Stock issued pursuant hereto
shall bear the following legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and have been taken for
investment purposes only and not with a view to the distribution
thereof, and, except as stated in an agreement between the holder of
this certificate, or its predecessor in interest, and the issuer
corporation, such securities may not be sold or transferred unless
there is an effective registration statement under said Act covering
such securities or such sale or transfer is exempt from the
registration and prospectus delivery requirements of said Act."
(b) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any fractional
share interest in Parent Common Stock which a holder of Company Common
Stock would otherwise be entitled to receive in the Merger (after
aggregating all fractional shares of Parent Common Stock that would
otherwise be issuable to such holder) shall be rounded up to the nearest
whole share if such fraction is 0.5 or greater and shall be rounded down to
the nearest whole share if such fraction is less than 0.5.
1.8 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of Company Common Stock that, as of the Effective
Time, are or may become entitled to exercise statutory appraisal rights
under Section 10-1328 of the Arizona Revised Statutes (the "ARIZONA LAW")
(such shares being referred to herein as "dissenting shares") shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5, and the holder or holders of such shares shall
be entitled only to such rights as may be granted to such holder or holders
under applicable Arizona Law; PROVIDED, HOWEVER, that if the status of any
such shares as "dissenting shares" shall not be perfected, or if any such
shares shall lose their status as "dissenting shares," then, as of the
later of the Effective Time or the time of the failure to perfect such
status or the loss of such status, such shares shall automatically be
converted into and shall represent only the right to receive (upon the
surrender of the certificate or certificates representing such shares)
Parent Common Stock in accordance with Section 1.5.
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(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to
Arizona Law and of any other demand, notice or instrument delivered to the
Company prior to the Effective Time pursuant to the Arizona Law, and (ii)
the opportunity to participate in all negotiations and proceedings with
respect to any such demand, notice or instrument. The Company shall not
make any payment or settlement offer prior to the Effective Time with
respect to any such demand unless Parent shall have consented in writing to
such payment or settlement offer.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the parties to this
Agreement agree to report the Merger and all related transactions consistently
therewith. The parties also agree to take such actions as may be reasonably
required to cause the Merger to be treated as a qualifying reorganization and to
take no action which would disqualify the Merger from reorganization status
under Section 368 of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent and the Merger Sub,
on the one hand, and the Company, on the other hand, shall use all reasonable
efforts to take all such action (including, without limitation, action to cause
the satisfaction of the conditions of the other to effect the Merger) as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation and Parent with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving Corporation and Parent are fully
authorized in the name of the Constituent Corporations or otherwise to take, and
shall take, all such action.
1.11 STOCK OPTIONS; WARRANTS. At the Effective Time, the Company shall
cause each option, whether vested or unvested (a "COMPANY OPTION"), that is then
outstanding under any of the Company's Stock Option Plans (collectively, the
"STOCK PLAN") to automatically terminate without further action by the holder of
a Company Option. The Company shall take similar action with respect to any
outstanding warrants to purchase Company Common Stock.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUB
Parent and the Merger Sub hereby represent and warrant to the Company that,
except as otherwise disclosed in Parent's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 2000 ("PARENT'S LATEST 10-KSB"), Parent's Quarterly
Report on Form 10-QSB for the fiscal quarter ended December 31, 2000 ("PARENT'S
LATEST 10-QSB"), or Parent's disclosure schedules delivered in connection
herewith (the "PARENT DISCLOSURE SCHEDULES"), each of the following:
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2.1 ORGANIZATION AND QUALIFICATION. Each of Parent and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite corporate power to
carry on its business as now conducted.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and the Merger Sub
has the requisite corporate power and authority to enter into this Agreement and
to carry out its obligations hereunder. The execution and delivery of this
Agreement by Parent and the Merger Sub and the consummation by Parent and the
Merger Sub of the transactions contemplated hereby have been duly authorized by
Parent and by the Board of Directors and sole shareholder of the Merger Sub, and
no other corporate proceedings on the part of Parent or the Merger Sub are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by Parent and constitutes a valid and binding
obligation thereof, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally or by general principles of equity.
Neither Parent nor the Merger Sub is subject to, or obligated under, any
provision of (a) their respective Articles of Incorporation or Bylaws, (b) any
agreement, arrangement or understanding, (c) any license, franchise or permit or
(d) subject to compliance with the statutes referred to in the next sentence,
any law, regulation, order, judgment or decree, which would be breached, or
violated, or in respect of which a right of termination or acceleration or any
encumbrance on any of its or any of its subsidiaries' assets would be created,
by its execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby, other than any such
breaches or violations which will not, individually or in the aggregate, have a
material adverse effect on the business, operations or financial condition of
Parent and its subsidiaries, taken as a whole. Other than authorizations,
consents and approvals of or filings or registrations with the Arizona Law,
applicable federal and state governmental authorities, no authorization, consent
or approval of, or filing with, any public body, court or authority is necessary
on the part of Parent or the Merger Sub for the consummation by Parent and the
Merger Sub of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make would not, individually or in the aggregate, have a material
adverse effect on the business, operations or financial condition of Parent and
its subsidiaries, taken as a whole.
2.3 CAPITAL STRUCTURE. The authorized capital stock of Parent consists of
(i) 50,000,000 shares of common stock, $.005 par value per share, of which
31,479,140 shares are issued and outstanding as of February 28, 2001 (the
"CAPITALIZATION DATE"), and (ii) 10,000,000 shares of preferred stock, $.01 par
value per share, none of which shares were outstanding as of the Capitalization
Date. All outstanding shares of capital stock of Parent are validly issued,
fully paid and nonassessable and not subject to preemptive rights contained in
Parent's charter documents or in any contract or agreement to which Parent is a
party. All outstanding shares of the capital stock of each of Parent's
subsidiaries are validly issued, fully paid and nonassessable and are owned by
Parent free and clear of any liens, security interests, pledges, agreements,
claims, charges or encumbrances.
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2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a
form other than Form S-8) and definitive proxy statement filed by Parent
with the Securities and Exchange Commission ("SEC") between January 1, 2000
and the date of this Agreement (collectively, the "PARENT SEC Documents").
As of the time it was filed with the SEC (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) as of their respective dates,
or as of the date of any amendment thereto, none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The audited financial statements and unaudited interim financial
statements of Parent included (or incorporated by reference) in the Parent
SEC Documents have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), are accurate
and complete in all material respects and fairly present the consolidated
financial position of Parent as of the dates thereof and the consolidated
results of Parent's operations and the changes in Parent's consolidated
financial position for the periods then ended, in the case of the unaudited
interim financial statements subject to the absence of footnotes and
year-end audit adjustments which will not, individually or in the
aggregate, be material in magnitude. Such unaudited interim financial
statements reflect all adjustments necessary to present a fair statement of
the results for the interim periods presented.
2.5 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will be, when issued in accordance with the provisions
of this Agreement, validly issued, fully paid and nonassessable.
2.6 ACCURACY OF INFORMATION. No representation or warranty by Parent or the
Merger Sub in this Agreement, and no exhibit, document, statement, certificate
or schedule furnished or to be furnished to the Company pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide the Company with adequate
information as to Parent and the Merger Sub and their affairs. There is no fact
which has not been disclosed to the Company that materially affects adversely or
could reasonably be anticipated to materially affect adversely the assets,
financial condition or operating results, customer, employee or supplier
relations, business condition, or financing arrangements of Parent or the Merger
Sub.
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2.7 TITLE TO PROPERTIES.
(a) Parent or one of Parent's subsidiaries owns good and marketable
title to each of the tangible properties and tangible assets reflected on
the balance sheet included in Parent's Latest 10-QSB or acquired since the
date thereof, free and clear of all material liens and encumbrances, except
for (A) liens for current taxes not yet due and payable, (B) liens or
mortgages described in Parent's Latest 10-QSB, (C) the properties subject
to the leases described in Parent's Latest 10-QSB, (D) liens securing
indebtedness described in SCHEDULE 2.7 of the Parent Disclosure Schedules
and (E) assets disposed of since the date of the balance sheet included in
Parent's Latest 10-QSB in the ordinary course of business.
(b) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of Parent's and its subsidiaries'
businesses are in good condition and repair (except where the failure to be
in such condition and repair, either individually or in the aggregate,
would not have a material adverse effect on Parent or any subsidiary of
Parent and except for ordinary wear and tear), and are usable in the
ordinary course of business. Parent and its subsidiaries own, or lease
under valid leases which afford peaceful and undisturbed possession of the
subject matter of the lease, all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their businesses.
2.8 ACCOUNTS RECEIVABLE. Parent's and its subsidiaries' notes and accounts
receivable recorded on the balance sheet included in Parent's Latest 10-QSB and
those arising since the date thereof are valid receivables (subject to a
reasonable allowance for doubtful accounts as set forth in Parent's Latest
10-QSB) arising from bona fide transactions entered into in the ordinary course
of business and are current and collectible in full in accordance with their
terms, subject to no valid counterclaims or setoffs.
2.9 EMPLOYMENT MATTERS. To the knowledge of Parent, (i) no key executive
employee of Parent or any subsidiary of Parent, and no group of Parent's or any
subsidiary's employees, has any plans to terminate his or its employment, (ii)
Parent and the subsidiaries have complied with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes, and (iii) Parent and its subsidiaries have no material labor
relations problems pending and their labor relations are satisfactory.
2.10 AFFILIATE TRANSACTIONS. Except as set forth or incorporated by
reference in Parent's Latest 10-KSB or Parent's Latest 10-QSB, no officer or
director of Parent or any subsidiary of Parent or any member of the immediate
family of any such officer or director, or any entity in which any of such
persons owns any beneficial interest (other than a publicly-held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than five percent (5%) of the stock of which is
beneficially owned by any of such persons) (collectively "INSIDERS"), (a) has
any material agreement with Parent or any subsidiary of Parent (other than
normal employment arrangements) or any material interest in any property, real,
personal or mixed, tangible or intangible, used in or pertaining to the business
of Parent or any subsidiary of Parent, or (b) has been indebted to Parent in
amounts in excess of $60,000 in the aggregate at any time (other than for
purchases subject to usual trade terms, for ordinary travel and expense payments
and for other transactions in the ordinary course of business). For purposes of
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the preceding sentence, the members of the immediate family of an officer or
director shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer or director.
2.11 COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. Parent, each of
Parent's subsidiaries and their respective officers, directors, agents and
employees have complied in all material respects, and currently are in
compliance in all material respects, with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the businesses or any owned or leased properties of Parent and its
subsidiaries and to which Parent or any of its subsidiaries may be subject, and
no claims have been filed against Parent or any of its subsidiaries alleging a
material violation of any such law or regulation. Parent and its subsidiaries
hold all material permits, licenses, certificates and other authorizations of
foreign, federal, state and local governmental agencies required for the conduct
of their businesses. Parent has not received any notice or other communication
from any governmental authority regarding any actual or possible violation of,
or failure to comply with, any legal requirement, except where failure to comply
with such legal requirement has not had and could not reasonably be expected to
have a material adverse effect on Parent.
2.12 NON-CONTRAVENTION; CONSENTS. Neither the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's or the Merger Sub's Articles of Incorporation or
Bylaws, or (ii) any resolution adopted by Parent's or Merger Sub's
stockholders or board of directors or committee of such board of directors;
(b) contravene, conflict with or result in a violation of the terms or
requirements of, or give any governmental authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any material governmental
authorization that is held by Parent or Merger Sub that otherwise relates
to Parent's business or to any of the assets owned or used by Parent;
(c) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any material contract of
Parent or Merger Sub, or give any Person the right to (i) declare a default
or exercise any remedy under any such material contract, (ii) accelerate
the maturity or performance of any such material contract, or (iii) cancel,
terminate or modify any such material contract; or
(d) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by Parent or
Merger Sub (except for minor liens and encumbrances that will not, in any
case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Parent or Merger
Sub).
9
2.13 BROKERAGE. Except as set forth on SCHEDULE 2.13 of the Parent
Disclosure Schedules hereto, there are no claims for investment banking fees,
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Parent, Merger Sub or any other subsidiary of
Parent for which the Shareholders will be responsible.
2.14 NO MATERIAL ADVERSE CHANGES. Except as set forth in the Parent SEC
Document, since January 1, 2001, there has been no material adverse change, and
no event has occurred that will or that would reasonably be expected to result
in a material adverse change, in the consolidated assets, financial condition,
operating results, customer, employee, supplier or franchise relations, business
condition or prospects, or financing arrangements of Parent.
2.15 LEGAL PROCEEDINGS. Except as disclosed in Parent's Latest 10-KSB or
Parent's Latest 10-QSB, there are no actions, suits, claims, proceedings, orders
or other investigations pending or threatened against Parent that challenges or
may have the effect or preventing, delaying, making illegal or otherwise
interfering with the Merger or any other transactions contemplated by this
Agreement or that could reasonably be expected to have a material adverse effect
on the business, properties, assets, condition (financial or otherwise) or
business prospects of Parent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
The Company and the Shareholders, severally and not jointly, represent and
warrant to Parent that, as of the date hereof, and again at the Effective Time
(subject to any changes permitted or contemplated hereby), except as otherwise
disclosed in the Company's disclosure schedules delivered in connection herewith
(the "COMPANY'S DISCLOSURE SCHEDULES"), with all schedules updated as necessary
and redelivered on the Closing Date, each of the following:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Arizona and has the requisite corporate and other power and authority (including
all licenses, permits and authorizations) to own and operate its properties and
to carry on its business as now conducted and presently proposed to be conducted
and to perform its obligations under all contracts, instruments, notes or other
binding commitments to which it is or may become a party or by which it or its
assets is or may become bound. The copies of the Company's Articles of
Incorporation and Bylaws which have been furnished by the Company to Parent
prior to the date of this Agreement reflect all amendments made thereto through
the date hereof and are correct and complete. The Company is qualified to do
business and is in good standing as a foreign corporation in every jurisdiction
in which the nature of its business or its ownership of property requires it to
be qualified. The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name.
10
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the requisite
corporate and other power and authority to enter into and perform this Agreement
and to carry out its obligations hereunder (it being understood that the
Company's obligations hereunder to effect the Merger is subject to the approval
of its shareholders as set forth in Section 3.26). The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and, except for the approval of its shareholders as set
forth in Section 3.26, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting creditors' rights generally or by general principles of
equity. Except as disclosed on SCHEDULE 3.2 of the Company Disclosure Schedules,
the Company is not subject to, or obligated under, any provision of (a) its
Articles of Incorporation or Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit or (d) subject to compliance
with any of the statutes referred to in the next sentence, any law, regulation,
order, judgment or decree, which would be breached or violated, or in respect of
which a right of termination or acceleration or any encumbrance on any of its
assets would be created, by its execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby,
and the Company has not taken any action that is inconsistent in any material
respect with any resolution adopted by the Company's shareholders, its board of
directors or any committee of its board of directors. The books of account,
stock records, minute books and other records of the Company are accurate,
up-to-date and complete in all material respects and have been maintained in
accordance with prudent business practices. Other than in connection with or in
compliance with provisions of the Arizona Law and the SEC, no authorization,
consent or approval of, or filing with, any public body, court or authority is
necessary on the part of the Company for the consummation by the Company of the
transactions contemplated by this Agreement.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock, 2,034,410 shares of which are issued and
outstanding as of the date hereof, and no shares of preferred stock. All of
the issued and outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable.
(b) There is no (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding
security, instrument or obligation that is or may become convertible into
or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) contract or agreement under which the Company is or may
become obligated to sell or otherwise issue any shares or its capital stock
or any other securities; or (iv) condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any person or
entity to the effect that such person or entity is entitled to acquire or
receive any shares of capital stock or other securities of the Company.
11
(c) All outstanding shares of capital stock of the Company and all
outstanding Company Options and Company Warrants have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable laws and regulations, and (ii) all requirements set forth in
applicable contracts and agreements.
(d) Except as disclosed on SCHEDULE 3.3(D) of the Company Disclosure
Schedules, the Company has never repurchased, redeemed or otherwise
reacquired shares of capital stock or other securities of the Company. All
securities so reacquired, if any, by the Company were reacquired in
compliance with (i) the applicable provisions of Nevada Law and all other
applicable laws and regulations, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable
contracts and agreements.
(e) Except as disclosed on SCHEDULE 3.3(E) of the Company Disclosure
Schedules, the Company is not under any obligation to register under the
Securities Act any of its presently outstanding securities or any
securities that may be subsequently issued, and no person or entity holds
any right to participate in new issuances of securities by the Company.
(f) Except as disclosed on SCHEDULE 3.3(F) of the Company Disclosure
Schedules, the Company is not a party to or obligated under any agreement,
arrangement or understanding, contingent or otherwise, (i) involving the
repurchase or redemption of any amount of Company Common Stock, (ii)
requiring the Company to issue any amount of Company Common Stock to any
person at any time, or (iii) contemplating the issuance at any time of
shares of Company Common Stock or other consideration to any person as a
guarantee by the Company of a minimum market price for Company Common
Stock.
3.4 FINANCIAL STATEMENTS. The Company prepared financial statements for the
fiscal years ended December 31, 2000, 1999 and 1998 (the "COMPANY'S FINANCIAL
STATEMENTS"), and the unaudited financial statements of the Company for the
interim period ended January 31, 2001 (the "COMPANY'S INTERIM FINANCIAL
STATEMENTS"), have been delivered to Parent, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and are accurate and complete in all material respects and present fairly and
accurately the consolidated financial position of the Company as of the dates
thereof and the consolidated results of their operations and the changes in
their consolidated financial position for the periods then ended, in the case of
the unaudited interim financial statements subject to year-end audit adjustments
which will not, individually or in the aggregate, be material in magnitude. Such
unaudited interim financial statements reflect all adjustments necessary to
present a fair statement of the results for the interim periods presented.
3.5 NO SUBSIDIARIES. The Company does not own, beneficially or otherwise,
any stock or other equity interest, partnership interest, joint venture
interest, or any other security issued by any other corporation, organization or
entity, and the Company has not agreed and is not obligated to make any future
investment in or capital contribution to any such corporation, organization or
entity.
12
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
material obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due and regardless of when
asserted) arising out of transactions heretofore entered into, or any action or
inaction, or any state of facts existing, including taxes with respect to or
based upon transactions or events heretofore occurring, except (a) obligations
under contracts or commitments described in SCHEDULE 3.6 of the Company
Disclosure Schedules, or under contracts and commitments which are not required
to be disclosed thereunder (but not liabilities for breaches thereof), (b)
liabilities reflected on the balance sheet included in the Company's Interim
Financial Statements, (c) liabilities which have arisen after the date of the
balance sheet included in the Company's Interim Financial Statements in the
ordinary course of business (none of which is a material uninsured liability for
breach of contract, breach of warranty, tort, infringement, claim or lawsuit),
and (d) liabilities otherwise disclosed in the Company Disclosure Schedules.
"Material" or "material" shall mean amounts in excess of $10,000 for purposes of
this Agreement, PROVIDED, HOWEVER, that in no event shall the aggregate of such
amounts exceed $25,000.
3.7 NO MATERIAL ADVERSE CHANGES. Except as disclosed on SCHEDULE 3.7 of the
Company Disclosure Schedules, there has been no material adverse change, and no
event has occurred that will or that would reasonably be expected to result in a
material adverse change, in the consolidated assets, financial condition,
operating results, customer, employee, supplier or franchise relations, business
condition or prospects, or financing arrangements of the Company, taken as a
whole.
3.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in SCHEDULE 3.8 of
the Company Disclosure Schedules, since January 1, 2000, the Company has not:
(a) redeemed or purchased, directly or indirectly, any shares of its
capital stock, or declared, accrued, set aside or paid any dividends or
distributions with respect to any shares of its capital stock;
(b) other than upon the exercise of outstanding warrants or options,
issued or sold any of its equity securities, securities convertible into or
exchangeable for its equity securities, warrants, options or other rights
to acquire its equity securities, or its bonds or other securities;
(c) borrowed any amount or incurred, guaranteed or become subject to
any material liability, except current liabilities incurred in the ordinary
course of business;
(d) discharged or satisfied any material lien or encumbrance or paid
any material liability, other than current liabilities paid in the ordinary
course of business;
13
(e) mortgaged, pledged or subjected to, or otherwise permitted to
become subject to, any lien, charge or other encumbrance, any of the assets
of the Company with a fair market value in excess of $10,000, except liens
for current property taxes not yet due and payable;
(f) sold, assigned or transferred (including without limitation
transfers to any employees, shareholders or affiliates of the Company) any
tangible assets, except for fair value in the ordinary course of business,
or canceled any debts or claims;
(g) sold, assigned or transferred (including without limitation
transfers to any employees, shareholders or affiliates of the Company) any
patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, except for fair value in the ordinary course of
business, or disclosed any proprietary confidential information to any
person other than Parent;
(h) suffered any extraordinary loss or waived any rights of material
value, whether or not in the ordinary course of business or consistent with
past practice;
(i) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom
and practice, or entered into any transaction with any Insider (as defined
in Section 3.20);
(j) suffered any material theft, damage, destruction or loss of or to,
or any material interruption in the use of, any property or properties
owned or used by it, whether or not covered by insurance;
(k) made or granted any bonus or any wage, salary or compensation
increase, or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement, with
respect to any director, officer or consultant of the Company or, except in
the ordinary course of the Company's business and consistent with the
Company's historical compensation practices, any other employee or group of
employees;
(l) amended or waived any of its rights under, or permitted the
acceleration of vesting under, (i) any provision of its Stock Plan or (ii)
any provision of any agreement evidencing any outstanding Company Option or
Company Warrant;
(m) made any capital expenditures or commitments therefor (other than
any such expenditures or commitments made in the ordinary course of
business for leasehold improvements at, or the furnishing or equipping of,
the facilities operated by the Company as of the date of this Agreement)
that aggregate in excess of $10,000;
14
(n) made any loans or advances to, or guarantees for the benefit of,
any persons that aggregate in excess of $10,000;
(o) effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(p) formed any subsidiary or acquired any equity interest or other
interest in any other entity;
(q) written off as uncollectible, or established any reserve with
respect to, any account receivable or other indebtedness in excess of a
total of $10,000;
(r) changed any of its methods of accounting or accounting practices
in any material respect;
(s) made any tax election;
(t) commenced or settled any legal proceeding;
(u) waived or agreed to waive any applicable statute of limitations or
any similar statutory or judicial doctrine benefiting the Company;
(v) entered into any material transaction or taken any other material
action outside the ordinary course of business or inconsistent with its
past practices; or
(w) made charitable contributions or pledges which in the aggregate
exceed $10,000.
3.9 TITLE TO PROPERTIES.
(a) The Company owns good and marketable title to each the tangible
properties and tangible assets reflected on the balance sheet included in
the Company's Interim Financial Statements or acquired since the date
thereof, free and clear of all liens and encumbrances, except for (A) liens
for current taxes not yet due and payable, (B) liens disclosed in SCHEDULE
3.9(A) of the Company Disclosure Schedules, (C) the properties subject to
the leases disclosed in SCHEDULE 3.9(C) of the Company Disclosure Schedules
and (D) assets disposed of since the date of the balance sheet included in
the Company's Interim Financial Statements in the ordinary course of
business consistent with past practices.
(b) (i) the real estate described in SCHEDULE 3.9(B) of the Company
Disclosure Schedules and the demised leases described in SCHEDULE 3.9(C) of
the Company Disclosure Schedules constitutes all of the real estate used or
occupied by the Company (the "REAL Estate") and (ii) the Real Estate has
15
access, sufficient for the conduct of the Company's business as now
conducted or as presently proposed to be conducted, to public roads and to
all utilities, including electricity, sanitary and storm sewer, potable
water, natural gas and other utilities, used in the operation of the
Company.
(c) The leases described in SCHEDULE 3.9(C) of the Company Disclosure
Schedules are in full force and effect, and the Company has a valid and
existing leasehold interest under each such lease for the term set forth
therein. The Company has delivered to Parent complete and accurate copies
of each of the leases described under such caption and none of such leases
has been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Parent. The Company
is not in default, and no circumstances exist which could result in such
default, under any of such leases; nor, to the best knowledge of the
Company, is any other party to any of such leases in default.
(d) All of the machinery, equipment and other tangible assets
necessary for the conduct of the Company's business are in good condition
and repair (except where the failure to be in such condition and repair,
either individually or in the aggregate, would not have a material adverse
effect on the Company and except for ordinary wear and tear), and are
usable in the ordinary course of business. The Company owns, or leases
under valid leases which afford peaceful and undisturbed possession of the
subject matter of the lease, machinery, equipment and other tangible assets
necessary for the conduct of their businesses.
(e) The Company is not in violation of any applicable zoning ordinance
or other law, regulation or requirement relating to the operation of any
properties used in the operation of its business, including without
limitation applicable environmental protection and occupational health and
safety laws and regulations, and the Company has not received any notice of
any such violation, or of the existence of any condemnation proceeding with
respect to any properties owned or leased by the Company.
3.10 ACCOUNTS RECEIVABLE. The Company's notes and accounts receivable
recorded on the balance sheet included in the Company's Interim Financial
Statements and those arising since the date thereof are valid receivables
(subject to a reasonable allowance for doubtful accounts as set forth in the
Company's Interim Financial Statements) arising from bona fide transactions
entered into in the ordinary course of business and are current and collectible
in full in accordance with their terms, subject to no valid counterclaims or
setoffs.
3.11 INVENTORIES. Except as disclosed in SCHEDULE 3.11 of the Company
Disclosure Schedules, the inventories of the Company recorded on the balance
sheet included in the Company's Interim Financial Statements, and the inventory
created or purchased since the date thereof, consists of a quantity and quality
usable and salable in the ordinary course of business, is not slow-moving as
determined in accordance with past practices, obsolete or damaged, is
merchantable and fit for its particular use, and is not defective.
16
3.12 TAX MATTERS. Except as disclosed on SCHEDULE 3.12 of the Company
Disclosure Schedules:
(a) The Company has (i) filed all Tax Returns required to be filed by
any jurisdiction to which it is subject, (ii) paid in full on a timely
basis all Taxes due and claimed to be due by each such jurisdiction under
sections 1374 and 1375 of the Code, (iii) duly collected or withheld and
timely paid all Taxes required to be collected from others or deducted and
withheld from any amounts paid to employees or others, and (iv) properly
completed and filed all sales tax exemption certificates for sales where
Tax was not charged. Such Tax Returns accurately and completely set forth
all relevant items and accurately reflect the Tax Liabilities for such
periods. No Tax deficiency or penalty has been asserted or threatened by
any such jurisdiction against the Company. "TAX" or "TAXES" means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not. "Tax
Return" or "Tax Returns" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(b) There is no audit of any Tax Return of the Company in progress.
There is no threatened action, suit, proceeding, investigation, audit, or
claim for or relating to Taxes, there are no matters under discussion with
any governmental authorities with respect to Taxes that could result in an
additional amount of Taxes, and no governmental authority has indicated
that it intends to audit any Tax Return of the Company.
(c) The Company (i) has not waived any statute of limitations with
respect to Tax obligations or agreed to any extension of time with respect
to a Tax assessment or deficiency, (ii) has not been a party to any Tax
allocation or sharing agreement, (iii) is not a member of an affiliated
group filing a consolidated federal income tax return, nor taken any other
action that could result in Liability for Taxes of an affiliated group
under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), including as a transferee or successor, by
contract, or otherwise, and (iv) is not currently the beneficiary of any
extensions of time within which to file any Tax Return. "Liability" means
any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction, nor is there any material
factual or legal basis for any such claim.
17
(d) SCHEDULE 3.12(D) of the Company Disclosure Schedules lists all
federal, state, local, and foreign income Tax Returns filed with respect to
the Company for all taxable periods for which the statute of limitations is
still open, and indicates those income Tax Returns that have been audited
and those that are currently the subject of an audit. The Company has
delivered to the Buyer correct and complete copies of all state, federal,
and foreign income tax returns with respect to all taxable periods for
which the statute of limitations is still open, and copies of all
examination reports and statements of deficiencies that have been assessed
against or agreed to by the Company and that may have a material effect on
the tax liability of the Company for any present or future taxable period
or for any past taxable period for which the statute of limitations is
still open.
(e) The Company does not have any net operating losses or other tax
attributes that are subject to limitation under Code Sections 382, 383, or
384, or the federal consolidated return regulations.
(f) The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
(g) The Company (i) has not agreed or consented at any time under
Section 341(f) of the Code to have the provisions of Section 341(f)(2) of
the Code apply to any disposition of any assets, (ii) has not agreed, and
is not required, to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise that will affect the
liability of the Company for Taxes, (iii) has not made an election, and is
not required, to treat any asset as owned by another person pursuant to the
provisions of Section 168(f) of the Code or as tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of
the Code, (iv) has not made any of the foregoing elections and is not
required to apply any of the foregoing rules under any comparable state or
local tax provision, and (v) does not own any material assets that were
financed directly or indirectly with, or that directly or indirectly
secure, debt the interest on which is tax-exempt under Section 103(a) of
the Code.
(h) The Company is not a party to any "Gain Recognition Agreements" as
such term is used in the Treasury Regulations promulgated under Section 367
of the Code.
(i) The Company has not made or become obligated to make, nor will
Parent, or the Company, as a result of any event connected with any
transaction contemplated herein and/or any termination of employment
related to such transaction, make or become obligated to make, any "excess
parachute payment," as defined in Section 280G of the Code (without regard
to subsection (b)(4) thereof).
18
(j) There are no liens for Taxes (other than for current Taxes that
are not yet due and payable or are being contested in good faith) upon the
assets of the Company.
(k) There are no joint ventures, partnerships, limited liability
companies, or other arrangements or contracts to which the Company is a
party and that could be treated as a partnership for federal income tax
purposes.
(l) The Company has no excess loss account, as such term is used in
Section 1.1502 of the Treasury Regulations, with respect to the stock of
any subsidiary.
(m) The Company has no outstanding any "deferred gain" resulting from
any "deferred intercompany transaction," as both such terms were used in
Section 1.1502-13 of the Treasury Regulations as such was in effect for
taxable years beginning before July 12, 1995.
(n) The Company has outstanding any "intercompany items" or any
"corresponding items" from any "intercompany transactions," as such terms
are used in Section 1.1503-13 of the Treasury Regulations as such is in
effect for taxable years beginning on or after July 12, 1995, that have not
previously been taken into account under the terms of such regulation.
(o) The Company does not have and has not had a "permanent
establishment" in any foreign country, as such term is defined in any
applicable Tax treaty or convention between the United States and such
foreign country and has not otherwise taken steps that have exposed, or
will expose, it to the taxing jurisdiction of a foreign country.
(p) The unpaid Taxes of the Company (A) did not, as of the most recent
fiscal month end prior to the date hereof, exceed the reserve for Tax
Liability (not including any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of the most recent balance sheet (other than in any notes thereto)
that has been made available to Parent and (B) will not, as of the Closing
Date, exceed such reserve in the Closing Balance Sheet.
3.13 CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in SCHEDULE 3.13(A) of the Company Disclosure
Schedules, the Company is not a party or bound to any (collectively, the
"MATERIAL CONTRACTS"):
(i) collective bargaining agreement or contract with any labor
union;
19
(ii) bonus, pension, profit sharing, retirement, or other form of
deferred compensation plan;
(iii) hospitalization insurance or similar plan or practice,
whether formal or informal;
(iv) contract for the employment of any officer, individual
employee, or other person on a full-time or consulting basis or
relative to severance pay for any such person;
(v) agreement or indenture relating to the borrowing of money in
excess of $10,000 or to mortgaging, pledging or otherwise placing a
lien on any of the assets of the Company;
(vi) guaranty of any obligation for borrowed money or otherwise,
other than endorsements made for collection;
(vii) lease or agreement under which it is lessor of, or permits
any third party to hold or operate, any property, real or personal,
for an annual rental in excess of $10,000;
(viii) contract or group of related contracts with the same party
for the purchase of products or services, under which the undelivered
balance of such products and services has a purchase price in excess
of $10,000;
(ix) contract or group of related contracts with the same party
for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of
$10,000;
(x) other contract or group of related contracts with the same
party continuing over a period of more than six months from the date
or dates thereof, either not terminable by it on 30 days' or less
notice without penalty or involving more than $10,000;
(xi) contract which prohibits the Company from freely engaging in
business anywhere in the world;
(xii) contract relating to the distribution of the Company's
products;
(xiii) franchise agreement;
20
(xiv) contract, agreement or understanding with any shareholder
who beneficially owns five percent (5%) or more of the Company Common
Stock or with any officer, director or employee (other than for
employment on customary terms);
(xv) license agreement or agreement providing for the payment or
receipt of royalties or other compensation by the Company in
connection with the proprietary rights as disclosed on SCHEDULE 3.14
of the Company Disclosure Schedules; or
(xvi) other agreement material to the Company's business or not
entered into in the ordinary course of business.
(b) Except as specifically disclosed on SCHEDULE 3.13(B) of the
Company Disclosure Schedules, (i) no contract or commitment required to be
disclosed under such caption has been breached or canceled by the other
party; (ii) since the date of the balance sheet included in the Company's
Interim Financial Statements, no customer or supplier has indicated that it
will stop or decrease the rate of business done with the Company, except
for changes in the ordinary course of the Company's businesses; (iii) the
Company has performed all obligations required to be performed by them in
connection with the contracts or commitments required to be disclosed under
such caption and are not in receipt of any claim of default under any
contract or commitment required to be disclosed under such caption; (iv)
the Company has no present expectation or intention of not fully performing
any obligation pursuant to any contract or commitment or commitment set
forth under such caption; and (v) the Company has no any knowledge of any
breach or anticipated breach by any other party to any contract or
commitment set forth under such caption.
(c) Prior to the date of this Agreement, Parent has been supplied with
a true and correct copy of each written contract or commitment, and a
written description of each oral contract or commitment, disclosed on
SCHEDULE 3.13 of the Company Disclosure Schedules, together with all
amendments, waivers or other changes thereto.
3.14 PROPRIETARY RIGHTS. Except as disclosed on SCHEDULE 3.14 of the
Company Disclosure Schedules, there are no patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets or other proprietary rights owned by the Company or any Subsidiary or
necessary to the conduct of the Company's or any Subsidiary's business as now
conducted. The Company owns and possesses all rights, titles and interest, or a
valid license, in and to the proprietary rights set forth under such caption.
The Company Disclosure Schedules describes under such caption all proprietary
rights which have been licensed to third parties and all proprietary rights
which are licensed from third parties by the Company. The Company has taken all
necessary action necessary to protect the proprietary rights set forth under
such caption. The Company has not received any notice of, nor is it aware of any
facts which indicate a likelihood of, any infringement, misappropriation, or
conflict from any third party with respect to the proprietary rights which are
listed under such caption; the Company has not infringed, misappropriated or
21
otherwise conflicted with any proprietary rights of any third parties, nor is it
aware of any infringement, misappropriation or conflict which will occur in the
continued operation of the Company; and no claim by any third party contesting
the validity of any proprietary rights listed under such caption has been made,
is currently outstanding, or to the best knowledge of the Company is threatened.
3.15 LITIGATION. Except as disclosed on SCHEDULE 3.15 of the Company
Disclosure Schedules, there are no actions, suits, claims, proceedings, orders
or investigations pending or threatened against the Company or otherwise
affecting any of their respective properties or assets, or that challenges or
may have the effect of preventing, delaying, making illegal or otherwise
interfering with the Merger or any other transactions contemplated by this
Agreement, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (collectively, "GOVERNMENTAL AUTHORITY"),
or that could reasonably be expected to have a material adverse effect on the
business, properties, assets, condition (financial or otherwise) or business
prospects of the Company and there is no basis known to the Company for any of
the foregoing. There is no order, writ, injunction, judgment or decree:
(a) to which the Company or any of the assets owned or used by the
Company is subject, or
(b) to which any officer or employee of the Company is subject that
prohibits such officer or employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business. Except as
set forth under such caption, the Company has not received any opinion or
legal advice to the effect that the Company is exposed from a legal
standpoint to any liability or disadvantage which may be material to it or
its prospects.
3.16 BROKERAGE. Except as disclosed on SCHEDULE 3.16 of the Company
Disclosure Schedules, there are no claims for investment banking fees, brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company for which any other party will be
responsible.
3.17 EMPLOYMENT MATTERS. Except for the pending resignation of Steve
Anderson, to the best knowledge of the Company, (i) no key executive employee of
the Company, and no group of the Company's employees, has any plans to terminate
his or its employment, (ii) the Company has complied with all laws relating to
the employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes, and (iii) the Company has no material labor relations problems
pending and their labor relations are satisfactory.
22
3.18 EMPLOYEE BENEFIT PLANS.
With respect to the employee benefits provided to current and former
employees, officers and directors of the Company:
(a) The Company currently maintain only the employee pension benefit
plans, as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), as are listed on SCHEDULE
3.18(A) of the Company Disclosure Schedules (the "PENSION PLANS").
(b) The Company currently maintain only the employee welfare benefit
plans, as defined in Section 3(1) of ERISA (including but not limited to,
life insurance, medical, hospitalization, holiday, vacation, disability
dental and vision plans) as are listed on SCHEDULE 3.18(B) of the Company
Disclosure Schedules (the "WELFARE PLANS").
(c) The Company currently maintain, or have entered into, only the
compensation programs and/or employment arrangements, (including but not
limited to, incentive compensation, bonus, stock option, stock purchase,
severance, sick pay, salary continuation, deferred compensation,
supplemental executive compensation plans, and employment and consulting
agreements) as are listed on SCHEDULE 3.18(C) of the Company Disclosure
Schedules (the "COMPENSATION PROGRAMS").
(d) The Company does not contribute, have not contributed within the
last ten years, to any multiemployer plan, as defined in Sections 3(37) and
4001 of ERISA, and have not incurred any withdrawal liability within the
meaning of Section 4201 of ERISA.
(e) Each Pension Plan and Welfare Plan is in compliance with ERISA;
each Pension Plan which is intended to be qualified under Section 401(a) of
the Code has been determined by the Internal Revenue Service to be so
qualified or a request for such determination has been timely filed with
the Internal Revenue Service (and to Company's best knowledge nothing has
occurred between the date of the last such determination and the Closing
Date to cause the Internal Revenue Service to revoke such determination).
(f) Any Pension Plan or any Welfare Plan designed to satisfy the
requirements of Section 125, Section 401, Section 401(k), Section 409,
Section 501(c)(9), Section 4975(e)(7), and/or Section 4980B of the Code,
complies with the requirements of such section and applicable regulations
thereunder.
(g) Neither the Company nor any other employer that is, or at any
relevant time was, together with the Company, treated as a "single
employer" under Section 414 of the Code, has at any time on or after
January 1, 1998 maintained or contributed to a defined benefit plan as
defined in Section 3(35) of ERISA, that is or was subject to Title IV of
23
ERISA; and no accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, exists (whether or not waived) with respect to any
Pension Plan as of the date hereof.
(h) All amounts required to be paid by the Company with respect to
each Pension Plan, Welfare Plan and Compensation Program on or before the
Closing Date have been paid.
(i) None of the Pension Plans or the Company or any party in interest
or disqualified person has engaged in any non-exempt "prohibited
transactions" as defined in Section 406 of ERISA or Section 4975 of the
Code.
(j) Except as disclosed on SCHEDULE 3.18(J) of the Company Disclosure
Schedules, no Pension Plan or Welfare Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law,
(ii) retirement benefits under a Pension Plan, (iii) death benefits under a
Welfare Plan, (iv) deferred compensation accrued on the books of the
Company or any Subsidiary, or (v) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary).
(k) No "leased employee," as that term is defined in Section 414(n) of
the Code, performs or has performed services for the Company.
(l) No liability has been, or is expected by the Company to be,
incurred by the Company under Title IV (including, without limitation,
Section 4062) of ERISA with respect to any Pension Plan.
(m) No reportable event within the meaning of Title IV of ERISA has
occurred with respect to any Pension Plan.
(n) The Company has furnished Parent with correct and complete copies
of each Pension Plan, Welfare Plan, and Compensation Program, together with
any trust agreements, summary plan descriptions, employee informational
material, financial statements relating thereto and participant listings.
3.19 INSURANCE. SCHEDULE 3.19 of the Company Disclosure Schedules lists and
briefly describes (including name of insurer, agent, coverage and expiration
date) each insurance policy maintained by, at the expense of or for the benefit
of the Company with respect to its properties and assets and describes any
material claims made thereunder. All of such insurance policies are in full
force and effect and the Company is not in default with respect to its
obligations under any of such insurance policies. Except as disclosed on
SCHEDULE 3.19 of the Company Disclosure Schedules, the Company is the sole
beneficiary of each such policy. The insurance coverage of the Company and the
subsidiaries is customary for corporations of similar size engaged in similar
lines of businesses. The Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any claim
under any insurance policy or (c) material adjustment in the amount of premiums
payable with respect to any insurance policy.
24
3.20 AFFILIATE TRANSACTIONS. Except as disclosed on SCHEDULE 3.20 of the
Company Disclosure Schedules, no officer or director of the Company or any
Subsidiary or any member of the immediate family of any such officer or
director, or any entity in which any of such persons owns any beneficial
interest (other than a publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 5%
of the stock of which is beneficially owned by any of such persons)
(collectively "INSIDERS"), (a) has any agreement with the Company (other than
normal employment arrangements) or any interest in any property, real, personal
or mixed, tangible or intangible, used in or pertaining to the business of the
Company, (b) has been indebted to the Company in amounts in excess of $10,000 in
the aggregate at any time, (c) has at any time competed, directly or indirectly,
with the Company, or (d) has any claim or right against the Company (other than
rights under Company Options and rights to receive compensation for services
performed as an employee of the Company). For purposes of the preceding
sentence, the members of the immediate family of an officer or director shall
consist of the spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law of such officer or
director.
3.21 SUPPLIERS. SCHEDULE 3.21 of the Company Disclosure Schedules lists the
[ten (10)] largest suppliers of the Company for the fiscal year (transaction
period) ended December 31, 2000, and sets forth opposite the name of each such
supplier the total amount of purchases from such supplier by the Company during
such period.
3.22 OFFICERS AND DIRECTORS; BANK ACCOUNTS. SCHEDULE 3.22 of the Company
Disclosure Schedules lists all officers and directors of the Company and the
Subsidiaries, and all of the Company's accounts and safe deposit boxes at any
bank or other financial institution (designating each authorized signer).
3.23 COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. The Company and its
officers, directors, agents and employees have complied in all respects, and
currently are in compliance in all respects, with all applicable laws and
regulations of foreign, federal, state and local governments and all agencies
thereof which affect the businesses or any owned or leased properties of the
Company and to which the Company may be subject, and no claims have been filed
against the Company alleging a violation of any such law or regulation, except
as disclosed on SCHEDULE 3.23 of the Company Disclosure Schedules. The Company
has not given or agreed to give any money, gift or similar benefit (other than
incidental gifts of articles of nominal value, gifts and prizes awarded pursuant
to promotional programs approved by the Company's management and
non-extraordinary entertainment expenditures) to any actual or potential
customer, supplier, foreign or domestic governmental employee or any other
person in a position to assist or hinder the Company in connection with any
actual or proposed transaction. The Company holds all of the permits, licenses,
certificates and other authorizations of foreign, federal, state and local
governmental agencies required for the conduct of their businesses. Without
limiting the generality of the foregoing, the Company has not violated, or
received a notice or charge asserting any violation of, the Occupational Safety
and Health Act of 1970 or any other state or federal acts or laws (including
rules and regulations thereunder) regulating or otherwise affecting employee
health and safety or the environment.
25
3.24 DISCLOSURE. Neither this Agreement nor any other agreement or
instrument executed in connection with the transactions contemplated hereby nor
any of the attachments or exhibits hereto nor the Company Disclosure Schedules
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed in writing to Parent of which any officer or
director of the Company or any Subsidiary is aware which materially affects
adversely or could reasonably be anticipated to materially affect adversely the
business, including operating results, assets, customer relations, employee
relations and business prospects, of the Company, taken as a whole.
3.25 NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 3.25 of
the Company Disclosure Schedules, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's Articles of Incorporation or Bylaws, or
(ii) any resolution adopted by the Company's shareholders, the Company's
board of directors or any committee of such board of directors;
(b) contravene, conflict with or result in a violation of, or give any
governmental authority or other person or entity the right to challenge any
of the transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any legal requirement or any order,
writ, injunction, judgment or decree to which the Company, or any of the
assets owned or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any governmental authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any governmental
permit or authorization that is held by the Company that otherwise relates
to the Company's business or to any of the assets owned or used by the
Company;
(d) contravene, conflict with or result in a violation or breach of,
require consent under, or result in a default under, any provision of any
contract or agreement to which the Company is a party, or give any person
or entity the right to (i) declare a default or exercise any remedy under
any such contract or agreement, (ii) accelerate the maturity or performance
of any such contract or agreement, or (iii) cancel, terminate or modify any
such contract or agreement; or
(e) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or
materially impair the operations of the Company).
26
Except as disclosed on SCHEDULE 3.25 of the Company Disclosure Schedules,
the Company is not and will not be required to make any filing with or give any
notice to, or to obtain any consent from, any person or entity in connection
with (x) the execution, delivery or performance of this Agreement or any of the
other agreements referred to in this Agreement, or (y) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
3.26 STOCKHOLDER VOTE REQUIRED. The affirmative vote of a majority of the
votes entitled to be cast by holders of the outstanding shares of Company Common
Stock (voting as a class) are the only votes of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the Merger under Arizona Law.
3.27 ENVIRONMENTAL AND SAFETY REQUIREMENTS. The Company is in compliance
with all applicable Environmental and Safety Requirements (as defined below),
and the Company possesses all required permits, licenses and certificates, and
has filed all notices or applications, required thereby. Neither the Company nor
any Shareholder has received any notice or other communication from any party
with respect to the Company's failure to comply with Environmental and Safety
Requirements. For purposes of this Agreement, "ENVIRONMENTAL AND SAFETY
REQUIREMENTS" means all federal, provincial, foreign and local laws, bylaws,
rules, regulations, ordinances, decrees, orders, statutes, actions, guidelines,
standards, arrangements, injunctions, policies and requirements relating to
public health and safety, worker health and safety, pollution and protection of
the environment (including without limitation the handling of any polluted,
toxic or hazardous materials), all as amended. The Company has no, nor are its
properties subject to any, nor are there any facts or circumstances which the
Company or any Shareholder reasonably believes could form the basis for any,
liability, contingent or otherwise arising out of any Environmental and Safety
Requirements. The Company does not have in its possession or under its control
any hazardous substances, except those Hazardous Substances as are used in the
ordinary course of the business of the Company and are used or maintained in
compliance with the Environmental and Safety Requirements.
3.28 SECURITIES MATTERS.
(a) Each Shareholder has such knowledge and experience in financial
and business matters and such experience in evaluating and investing in
companies such as Parent as to be capable of evaluating the merits and
risks of an investment in the Parent Common Stock. Each Shareholder has the
financial ability to bear the economic risk of such Shareholder's
investment in the Parent Common Stock being acquired by such Shareholder
hereunder, has adequate means for providing for his current needs and
contingencies and has no need for liquidity with respect to his investment
in Parent.
(b) Each Shareholder is acquiring the Parent Common Stock for
investment for his own account, for investment purposes only, and not with
the view to, or for resale in connection with, any distribution thereof.
Each Shareholder understands that the shares of Parent Common Stock have
not been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or under the securities laws of various states, by
reason of a specified exemption from the registration provisions thereunder
which depends upon, among other things, the bona fide nature of the
Shareholder's investment intent as expressed herein.
27
(c) Each Shareholder acknowledges that the shares of Parent Common
Stock must be held indefinitely unless they are subsequently registered
under the Securities Act and under applicable state securities laws or an
exemption from such registration is available. Each Shareholder has been
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resale of the securities purchased in
a private placement subject to the satisfaction of certain conditions
including, among other things, the availability of certain current public
information about Parent and compliance with applicable requirements
regarding the holding period and the amount of securities to be sold and
the manner of sale.
(d) Each Shareholder has relied upon independent investigations made
by such Shareholder or his representatives and is fully familiar with the
business, results of operations, financial condition, prospects and other
affairs of Parent and realizes the shares of Parent Common Stock are a
speculative investment involving a high degree of risk for which there is
no assurance of any return. Each Shareholder has, among other things,
received and carefully reviewed Parent's SEC Documents. Each Shareholder
acknowledges that in connection with the transactions contemplated hereby,
neither Parent nor anyone acting on its behalf or any other person has
made, and such Shareholder is not relying upon, any representations,
statements or projections concerning Parent, its present or projected
results of operations, financial condition, prospects, present or future
plans, acquisition plans, products and services, or the value of the Parent
Common Stock or Parent's business or any other matter in relation to
Parent's business or affairs. Each Shareholder has had an opportunity to
discuss Parent's business, management, financial affairs and acquisition
plans with its management, to review Parent's facilities, and to obtain
such additional information concerning such Shareholder's investment in the
Parent Common Stock in order for such Shareholder to evaluate its merits
and risks, and such Shareholder has determined that the shares of Parent
Common Stock are a suitable investment for such Shareholder and that at
this time such Shareholder could bear a complete loss of such Shareholder's
investment.
(e) Each Shareholder is aware that no federal or state or other agency
has passed upon or made any finding or determination concerning the
fairness of the transactions contemplated by this Agreement or the adequacy
of the disclosure of the exhibits and schedules hereto or thereto and such
Shareholder must forego the security, if any, that such a review would
provide.
(f) Each Shareholder understands and acknowledges that neither the
Internal Revenue Service nor any other tax authority has been asked to rule
on the tax consequences of the transactions contemplated hereby or by this
Agreement and, accordingly, in making such Shareholder's decision to
acquire the Parent Common Stock such Shareholder has relied upon the
investigations of such Shareholder's own tax and business advisers in
addition to such Shareholder's own independent investigations, and that
such Shareholder and such Shareholder's advisers have fully considered all
the tax consequences of such Shareholder's acquisition of the Parent Common
Stock.
28
(g) Each Shareholder is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D under the Securities Act by reason
of being a natural person who had an individual income in excess of
$200,000 in cash of the two most recent years and has a reasonable
expectation of reaching the same income level in the current year. Each
Shareholder understands that all certificates for the Parent Common Stock
issued to such Shareholder shall bear a legend in substantially the form
set forth in Section 1.7(a) of this Agreement.
3.29 ACCOUNTING MATTERS. Neither the Company nor any Shareholder, nor, to
the knowledge of the Company and the Shareholders, any of the Company's
directors or officers, has taken any action or is aware of any facts or
circumstances in respect of the Company or its accounting procedures which would
have the effect of precluding accounting for the transactions contemplated by
this Agreement as a "pooling of interests." Except as set forth on SCHEDULE 3.29
of the Company's Disclosure Schedules, since January 1, 1999, the Company has
not issued, redeemed or purchased any Company shares, bond or corporate security
or otherwise altered its equity interests. Except as set forth on SCHEDULE 3.29,
no Shareholder has (i) since January 1, 1999 sold, transferred or assigned any
securities of the Company or (ii) at any time in any way reduced its risk or
committed to reduce its risk with respect to the Company shares owned by such
Shareholder or the Parent Common Stock to be acquired by such Shareholder
hereunder, whether by entering into a put, collar, option, margin or other
arrangement. Without in any way limiting the other provisions of this Section,
the Company is autonomous and is not currently, and has not been since January
1, 1999, a division or subsidiary of another enterprise. The Company is
independent of Parent and, except as disclosed on SCHEDULE 3.29, between January
1, 1999 and the Closing Date, neither the Company nor any Shareholder owned any
shares of Parent Common Stock. Except as disclosed on SCHEDULE 3.29, since
January 1, 1999: the Company has not: (a) in any way changed the equity
interests of its securities or (b) disposed of significant assets, and any
changes in equity interests, acquisitions of treasury securities or disposal of
assets disclosed on SCHEDULE 3.29 were not in contemplation of the transactions
contemplated by this Agreement. Any transactions or acquisitions of shares
disclosed on SCHEDULE 3.29 were not in contemplation of the transactions
contemplated by this Agreement.
3.30 NO ILLEGAL OR IMPROPER TRANSACTIONS. None of the Company, any
Shareholder or any of the Company's directors, offices or, to the knowledge of
the Company and the Shareholders, employees has, directly or indirectly used
funds or other assets of the Company, or made any promise or undertaking in such
regard, for (a) illegal contributions, gifts, entertainment or other expenses
relating to political activity; (b) illegal payments to or for the benefit of
governmental officials or employees, whether domestic or foreign; (c) illegal
payments to or for the benefit of any person, firm, corporation or other entity,
or any director, officer, employee, agent or representative thereof; or (d) the
establishment or maintenance of a secret or unrecorded fund; and there have been
no false or fictitious entries made in the books or records of the Company.
3.31 POWER OF ATTORNEY. Neither the Company nor any Shareholder has given
to any person or entity for any purpose any power of attorney which is currently
in effect.
29
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS PENDING THE MERGER. The Company covenants and
agrees that, prior to the Effective Time, unless Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld) or as otherwise
expressly contemplated or permitted by this Agreement:
(a) The businesses of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and past custom and practice; and
the Company shall maintain their facilities in good condition and repair
and in accordance with the Company's policies and procedures relating
thereto as in effect prior to the execution of this Agreement;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue, sell, pledge, dispose of or encumber
(or permit any of the Subsidiaries to issue, sell, pledge, dispose of or
encumber) (A) any additional shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of, any
of its capital stock, except for issuances upon the exercise of options or
warrants outstanding on the date hereof, or (B) any of its assets, except
for fair value in the ordinary course of business; (ii) amend or propose to
amend its Articles of Incorporation or Bylaws; (iii) split, combine or
reclassify any outstanding shares of Company Common Stock or other
securities of the Company, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property or otherwise with
respect to shares of Company Common Stock or other securities of the
Company; (iv) redeem, purchase or acquire or offer to acquire any shares of
Company Common Stock or other securities of the Company; (v) acquire (by
merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other business
organization or division or material assets thereof; (vi) incur or
guarantee any indebtedness for borrowed money or issue any debt securities
except the borrowing of working capital in the ordinary course of business
and consistent with past practice or (vii) enter into or propose to enter
into, or modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in this Section
4.1(b);
(c) The Company shall not, directly or indirectly, (i) enter into or
modify any Material Contract, agreement or understanding to which the
Company is a party; (ii) enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officers or directors or
consultants; (iii) make any capital expenditures, including any
capitalizable lease obligations, other than expenditures necessary to
maintain existing assets in good repair and other capital expenditures in
amounts not exceeding $10,000 in the aggregate; or (iv) in the case of
employees who are not officers or directors or consultants, grant or take
30
any action with respect to the granting of any salary increases, severance
or termination pay or increases in other benefits, other than grants or
such actions as are in the ordinary course of the Company's business and
are consistent with the Company's historic compensation practices, or grant
or take any actions with respect to the granting of any bonuses;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement
for the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director;
(e) The Company shall use its best efforts to cause its current
insurance (or reinsurance) policies not to be canceled or terminated or
reduced in coverage amount or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation, reduction in
coverage amount or lapse, replacement policies providing coverage equal to
or greater than the coverage under the canceled, terminated, reduced or
lapsed policies for substantially similar premiums are in full force and
effect;
(f) The Company (i) shall use its best efforts to preserve intact its
business organization and good will, keep available the services of its
officers and employees as a group and maintain satisfactory relationships
with suppliers, distributors, customers and others having business
relationships with it; (ii) shall not take any action which would render,
or which reasonably may be expected to render, any representation or
warranty made by it in this Agreement or in any other agreement or
instrument executed in connection with the transactions contemplated hereby
untrue at, or at any time prior to, the Effective Time; (iii) shall notify
Parent of any emergency or other change in the normal course of its
business or in the operation of its properties and of any governmental or
third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency, change,
complaint, investigation or hearing would be material, individually or in
the aggregate, to the business, operations or financial condition of the
Company or to the Company's, Parent's or `s ability to consummate the
transactions contemplated by this Agreement; and (iv) shall notify Parent
if the Company shall discover that any representation or warranty made by
it in this Agreement was when made, or has subsequently become, untrue;
(g) The Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(h) The Company will not waive or agree to waive any applicable
statute of limitations or any similar statutory or judicial doctrine
benefiting the Company;
31
(i) The Company shall not commence or settle any material legal action
or proceeding, PROVIDED, HOWEVER, that the Company may settle any legal
actions or proceedings which were pending as of the date of the Company's
Interim Financial Statements so long as the consideration paid or agreed to
be paid by the Company in connection with such settlements does not exceed
$10,000 in any individual case or $10,000 in the aggregate for all such
settlements (in the case of cash settlements) or cause the number of shares
of Company Common Stock issued and outstanding, after taking into account
any shares issued or canceled in connection with such settlement, to exceed
the number of shares of Company Common Stock issued and outstanding on the
date of this Agreement;
(j) The Company shall cause its officers to report at Parent's request
(but in no event less frequently than weekly) to Parent concerning the
status of the Company's business;
(k) Subject to the fiduciary obligations of its directors as advised
by counsel, the Company shall not, except as required by law, call any
meeting of its shareholders other than the meeting contemplated in Section
5.1; and
(1) The Company shall not make or amend any federal, state, or local
Tax election, agree to waive or extend any statute of limitations, or
resolve or agree to resolve any audit or proceeding relating to Taxes.
4.2 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the period subsequent to the execution of this Agreement
and prior to the Effective Time (the "PRE-CLOSING PERIOD"), the Company
shall promptly notify Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of
any representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause
or constitute an inaccuracy in or breach of any representation or
warranty made by the Company in this Agreement if (A) such
representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
32
(iii) any breach of any covenant or obligation of the Company;
and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Sections
6.1, 6.2 or 6.3 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.2(a) requires any change in the Company
Disclosure Schedules, or if any such event, condition, fact or circumstance
would require such a change assuming the Company Disclosure Schedules were
dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company shall promptly
deliver to Parent an update to the Company Disclosure Schedules specifying
such change. No such update shall be deemed to supplement or amend the
Company Disclosure Schedules for the purpose of (i) determining the
accuracy of any of the representations and warranties made by the Company
in this Agreement, or (ii) determining whether any of the conditions set
forth in Sections 6.1, 6.2 or 6.3 has been satisfied.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 SHAREHOLDERS MEETING. The Company shall call and hold a meeting of its
Shareholders (the "COMPANY SHAREHOLDERS' MEETING") to submit this Agreement, the
Merger and related matters for the consideration and approval of the Company's
Shareholders or, in the alternative, obtain the unanimous written consent of its
Shareholders. In the case of a Company Shareholders' Meeting, the Company
Shareholders' Meeting will be called, held and conducted, and any proxies will
be solicited, in compliance with applicable law.
5.2 EXPENSES. Each party to this Agreement shall bear their own costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby. For purposes of clarification, the legal fees of Mallery &
Zimmerman, S.C. incurred by the Company and the Shareholders in connection with
the transactions contemplated by this Agreement shall be paid by the Company.
5.3 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using reasonable efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, including, but
not limited to, any submissions of information requested by governmental
authorities.
5.4 NO NEGOTIATIONS, ETC. The Company shall not, directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
encourage submission of any inquiry, proposal or offer from any person or entity
33
(including any of its or their officers or employees) other than Parent relating
to any liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or any portion of the assets of, or any equity
interest in, the Company or other similar transaction or business combination
involving the Company, or, unless the Company's Board of Directors receives a
written opinion from the Company's outside counsel (which opinion shall also be
addressed to Parent) stating that there would be a material and substantial risk
of liability on the part of the members of the Company's Board of Directors to
the Company's shareholders for failure to do so, participate in any discussions
or negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by, or consider, entertain or
accept any proposal or offer from, any other person or entity to do or seek any
of the foregoing. The Company shall promptly notify Parent if any such proposal
or offer, or any inquiry from or contact with any person with respect thereto,
is made and shall promptly provide Parent with such information regarding such
proposal, offer, inquiry or contact as Parent may request.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice to
each other party of (a) the occurrence or failure to occur of any event,
conditions, fact or circumstance which occurrence or failure would be likely to
cause any representation or warranty on its part contained in this Agreement to
be untrue or inaccurate at, or at any time prior to, the Effective Time, and (b)
any material failure of such party, or any officer, director, shareholder,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.6 ACCESS TO INFORMATION; CONFIDENTIALITY. Parent and its attorneys,
accountants, consultants and representatives shall continue to have access to
the books and records of the Company and such other information pertaining to
the business and assets of the Company as Parent shall reasonably request, and
the Company and its attorneys, accountants, consultants and representatives
shall continue to have access to the books and records of Parent and such other
information pertaining to the business and assets of Parent as the Company shall
reasonably request, and each of Parent and the Company shall provide the other
with reasonable access to its officers and other personnel, as provided in Part
Two, paragraph C of the Letter of Intent. The terms of paragraph C and F of Part
Two of the Letter of Intent shall apply, in the event of a termination of this
Agreement, to information obtained as a result of such access and assistance.
5.7 SHAREHOLDER CLAIMS. The Company shall not settle or compromise any
claim brought by any present, former or purported holder or owner of any
securities of the Company in connection with the Merger without the prior
written consent of Parent.
5.8 CONSENTS. As promptly as practicable after the execution of this
Agreement, each party to this Agreement (a) shall make all filings (if any) and
give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
consents (if any) required to be obtained (pursuant to any applicable law,
regulation, contract or agreement, or otherwise) by such party in connection
with the Merger and the other transactions contemplated by this Agreement.
Parent shall (upon request) promptly deliver to the Company a copy of each such
34
filing made, each such notice given and each such consent obtained by Parent or
Merger Sub during the period subsequent to the date hereof and prior to the
Effective Time; and the Company shall (upon request) promptly deliver to Parent
a copy of each such filing made, each such notice given and each such consent
obtained by the Company during the period subsequent to the date hereof and
prior to the Effective Time.
5.9 NOTIFICATION. (a) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constituted an inaccuracy in or breach of
any representation or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause
or constitute an inaccuracy in or breach of any representation or
warranty made by Parent in this Agreement if (A) such representation
or warranty had been made as of the time of the occurrence, existence
or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or
existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Sections
6.1, 6.2 or 6.3 impossible or unlikely.
5.10 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing Period, (a)
the Company shall use all commercially reasonable efforts to cause the
conditions set forth in Sections 6.1 and 6.3 to be satisfied on a timely basis,
and (b) Parent or Merger Sub shall each use all commercially reasonable efforts
to cause the conditions set forth in Sections 6.1 and 6.2 to be satisfied on a
timely basis.
5.11 TAX MATTERS. Prior to the Closing:
(a) The Company shall give Parent and its authorized representatives
full access to all properties, books, records and Tax Returns of or
relating to the Company, whether in the possession of the Company, its
Subsidiaries, or third-party representatives in order that Parent may have
full opportunity to make such investigations as it shall desire to make of
the affairs of the Company and its Subsidiaries. The Company shall ensure
that all third-party representatives of the Company, including without
limitation accountants and attorneys, fully cooperate and be available to
Parent in connection with such investigation.
35
(b) The Company shall terminate all tax allocation agreements and tax
sharing agreements with respect to the Company and shall ensure that such
agreements are of no further force or effect as to the Company on and after
the Closing and there shall be no further liability of the Company under
any such agreements.
5.12 (a) INDEMNIFICATION BY THE SHAREHOLDERS. From and after the Closing,
each Shareholder, severally and not jointly, agrees to indemnify, defend and
save Parent and Merger Sub and their officers, directors, employees, or agents
(each, an "INDEMNIFIED PARENT PARTY"), harmless from and against, and to
promptly pay to an Indemnified Parent Party or reimburse an Indemnified Parent
Party for, any and all liabilities (whether contingent, fixed or unfixed,
liquidated or unliquidated, or otherwise), obligations, deficiencies, demands,
claims, suits, actions, or causes of action, assessments, losses, costs,
expenses, interest, fines, penalties, actual or punitive damages or costs or
expenses of any and all investigations, proceedings, judgments, environmental
analyses, remediations, settlements and compromises (including reasonable fees
and expenses of attorneys, accountants and other experts incurred by any
indemnified party in any action or proceeding between such indemnified party and
the indemnitor or between any indemnified party and any third party or
otherwise) (individually a "LOSS" and collectively, the "LOSSES") sustained or
incurred by any Parent Indemnified Party relating to, resulting from, arising
out of or otherwise by virtue of (i) any misrepresentation or breach of a
representation or warranty made herein or in any certificate delivered hereunder
by the Company or any Shareholder, (ii) any non-compliance with or breach by the
Company or any Shareholder, or any Affiliate of the Company or any Shareholder,
of any of their respective covenants or agreements contained in this Agreement
to be performed by the Company, any Shareholder, or any Affiliate of the Company
or any Shareholder, (iii) any allegations by a third party that is not an
Indemnified Parent Party which, if true, would constitute a misrepresentation or
breach of a representation or warranty made herein by the Company or any
Shareholder or non-compliance with or breach by the Company or any Shareholder,
or any Affiliate of the Company or any Shareholder of any of their respective
covenants or agreements contained in this Agreement to be performed by any
Shareholder, the Company or any or their respective Affiliates, or (iv) any
obligation or liability, contingent or otherwise, of the Company or any
Shareholder for brokers' or finders' fees or commissions in connection with the
transactions contemplated by this Agreement. Subject to Section 5.12(d)(iii),
the liability of the Shareholders hereunder (and Parent's recourse with respect
to the liability of the Shareholders) shall be limited to the Share
Consideration, which shall be valued at the Closing Bide Price of Parent Common
Stock on the trading day immediately preceding the date of the written notice
delivered pursuant to Section 5.12(c) hereof. "CLOSING BID PRICE" means, for the
Parent Common Stock as of any date, the last closing bid price for such security
on the principal securities exchange or trading market where such security is
listed or traded (the "PRINCIPAL MARKET') as reported by Bloomberg Financial
Markets ("BLOOMBERG"), or if the foregoing does not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price for such
security as reported by Bloomberg, or, if no last closing trade price is
36
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Shareholders collectively. All such determinations are to
be appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
(b) INDEMNIFICATION BY PARENT. From and after the Closing, Parent and
the Merger Sub agree to indemnify, defend and save the Shareholders and
their respective Affiliates, and each of their respective officers,
directors, employees or agents (each, an "INDEMNIFIED SELLER PARTY")
harmless from and against, and to promptly pay to an Indemnified Seller
Party or reimburse an Indemnified Seller Party for, any and all Losses
sustained or incurred by any Seller Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of (i) any
misrepresentation or breach of a representation or warranty made herein by
Parent, (ii) any non-compliance with or breach by Parent or the Merger Sub
or any Affiliate of Parent or the Merger Sub of any of the covenants or
agreements contained in this Agreement or the Transaction Documents to be
performed by Parent or the Merger Sub or any of their Affiliates, and (iii)
any obligation or liability, contingent or otherwise, of Parent or the
Merger Sub for brokers' or finders' fees or commissions in connection with
the transactions contemplated by this Agreement or the Transaction
Documents.
(c) PROCEDURE FOR INDEMNIFICATION. The following procedure shall apply
to the foregoing agreements to indemnify and hold harmless:
(i) The party who is seeking indemnification (the "CLAIMANT")
shall give written notice to the party from whom indemnification is
sought (the "INDEMNITOR") promptly after the Claimant learns of the
claim or proceeding, provided that the failure to give such notice
shall not relieve the Indemnitor of its obligations hereunder except
to the extent it is actually damaged thereby.
(ii) With respect to any third-party claims or proceedings as to
which the Claimant is entitled to indemnification, the Indemnitor
shall have the right to select and employ counsel of its own choosing
to defend against any such claim or proceeding, to assume control of
the defense of such claim or proceeding, and to compromise, settle or
otherwise dispose of the same, if the Indemnitor deems it advisable to
do so, all at the expense of the Indemnitor. The parties will fully
cooperate in any such action, and shall make available to each other
any books or records useful for the defense of any such claim or
proceeding. The Claimant may elect to participate in the defense of
any such third party claim at its sole expense, and may, at its sole
expense, retain separate counsel in connection therewith. Subject to
the foregoing (A) the Claimant shall not settle or compromise any such
third party claim without the prior written consent of the Indemnitor
and (B) the Indemnitor shall not settle or compromise any such third
party claim without the prior written consent of the Claimant, in each
case of (A) and (B) which consent shall not be unreasonably withheld.
(iii) No action or claim for Damages under Section 5.12(a) or (b)
arising out of or resulting from a breach of representations and
warranties contained herein shall be brought or made after the
37
expiration of the 12 month anniversary of the Closing Date; PROVIDED,
HOWEVER, that the foregoing time limitations shall not apply to: (1)
any of the representations and warranties contained in Sections 3.1,
3.3, 2.1 and 2.3, each of which shall survive indefinitely; or (2) any
such claims which have been the subject of a good faith written notice
from Buyer to the Shareholders or from the Shareholders to Buyer, as
the case may be, prior to such period, which notice specifies in
reasonable detail the nature and basis for such claim (which shall
survive until the final resolution of such claims).
(d) LIMITATION ON INDEMNIFICATION RIGHTS.
(i) Subject to the provisions of Subsections (d)(ii) and (d)(iii)
below it is understood and agreed that no claim for recovery of
indemnifiable damages may be asserted based on a representation,
warranty or applicable portion thereof set forth in this Agreement
after it has been extinguished in accordance with Section 8.8 hereof.
The date on which a claim would be extinguished in accordance with
Section 8.8 but for the provisions of this Subsection (d) is sometimes
referred to as the "EXPIRATION DATE" of such claim.
(ii) In order to ensure that the transactions contemplated by
this Agreement qualify for treatment as a pooling of interests, the
parties agree that any dispute, disagreement or controversy between
any party relating to a warranty or representation or applicable
portion thereof set forth in this Agreement that is not resolved by
the applicable Expiration Date shall promptly be submitted to the
American Arbitration Association to be resolved by binding arbitration
in accordance with their rules. The place of arbitration shall be
Phoenix, Arizona. The arbitration tribunal shall be composed of three
arbitrators, one of which shall be appointed by Parent within ten
business days of the applicable Expiration Date and one of whom shall
be appointed by the other party or parties to the dispute,
disagreement or controversy within ten business days of the applicable
Expiration Date and one of whom shall be appointed by such two
arbitrators within 15 business days of the applicable Expiration Date.
The arbitrators will be directed to and shall resolve such dispute,
disagreement or controversy on the basis of the information provided
to them or soon as practicable and, in any event, by the applicable
Expiration Date.
(iii) Except as set forth below, the Shareholders shall not be
liable to Buyer under this Section 5.12 for any Damages until the
amount otherwise due exceeds $100,000 in the aggregate, in which case
the Shareholders shall be liable to Buyer for all such amounts,
excluding the first $100,000, provided, however, that in no event
shall the liability of the Shareholders hereunder exceed $250,000 in
the aggregate. Buyer shall give the Shareholders reasonable notice of
any Damages that might apply toward the first $100,000.
Notwithstanding anything to the contrary in this Section 5.12, no
limitation or condition of liability provided in this Section 5.12 or
Section 8.8 shall apply to the breach of any of the representations
and warranties contained herein if such representation or warranty was
made willfully or with the intent to deceive.
(e) WAIVER OF CLAIMS. Without in any way limiting the obligations of
the Shareholders under this Agreement, each Shareholder hereby expressly
and irrevocably waives any rights of contribution, subrogation, recoupment,
counterclaim, set-off or indemnification that such Shareholder may have
against the Company.
38
(f) SOLE REMEDY FOR DAMAGES. Subject to the provisions of the next
sentence of this Section (f), the indemnification obligations of the
parties set forth in this Section 5.12 shall constitute the sole and
exclusive remedy of the parties for the recovery of money damages with
respect to any and all matters arising out of this Agreement.
Notwithstanding the foregoing, the terms of this Section 5.12 shall not be
construed as limiting in any way whatsoever any remedy to which any party
may be entitled other than the recovery of money damages, including but not
limited to equitable remedies, specific performance, injunctive relief and
rescission.
5.13 TRADING PROHIBITION. The Company and each Shareholder acknowledge that
they are aware, and that they have advised and will continue to advise all
employees and representatives of the Company or any Shareholder to whom the
existence of this transaction or any such information has been or may be
disclosed that (i) the federal securities laws may prohibit a person who has
material, non-public information from purchasing or selling securities of any
company to which such information relates and (ii) material non-public
information shall not be communicated to any other person except as expressly
permitted by this Agreement. Between the date of this Agreement and the Closing
neither the Company nor any Shareholder (nor any trustees or beneficiaries of
the Shareholder) will acquire any shares of common stock, $.005 par value per
share, of Parent, except that the Shareholders may acquire the Parent Shares at
Closing as contemplated herein. Each Shareholder will not, and it will cause any
of its trustees and beneficiaries not to, in any way sell, transfer or assign
any Company Shares owned by any Shareholder or the Parent Shares to be acquired
by any Shareholder hereunder, or reduce his risk or commit to reduce his risk
with respect to the Company Shares owned by any Shareholder or Parent Common
Stock to be acquired by any Shareholder hereunder, whether by entering into a
put, collar, option, margin or other arrangement, until, in the case of Parent
Shares, after the filing with the SEC (as defined in Section 8.5) of financial
results of Parent covering at least 30 days of post-Closing combined operations
of Parent and the Company, except for the sale of Company Shares to Parent as
contemplated hereunder.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) this Agreement (including without limitation the plan of merger
contained herein) and the Merger shall have been approved and adopted by
the requisite vote or unanimous written consent of the Shareholders as may
be required by law and by any applicable provisions of the Company's
Articles of Incorporation and Bylaws;
39
(b) the materials distributed with respect to the Company
Shareholders' Meeting, if held, shall not contain any untrue statement of a
material fact and shall not omit any statement required to be contained
therein or necessary to make any statement contained therein, in the light
in which made, not misleading;
(c) there shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make consummation
of the Merger illegal;
(d) no injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and remain
in effect which would prohibit consummation of the Merger;
(e) there shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the consummation
of the Merger, or seeking to obtain material damages in connection with the
Merger, (ii) seeking to prohibit direct or indirect ownership or operation
by Parent of all or a material portion of the business or assets of the
Company or of Parent and its subsidiaries, or to compel Parent or any of
its subsidiaries or the Company to dispose of or to hold separately all or
a material portion of the business or assets of Parent and its subsidiaries
or of the Company, as a result of the Merger, (iii) seeking to impose or
confirm limitations on the ability of Parent effectively to exercise
directly or indirectly full rights of ownership of any shares of Company
Common Stock on all matters properly presented to the Company's
shareholders, (iv) seeking to require direct or indirect divestiture by
Parent of any shares of Company Common Stock or any shares of the Surviving
Corporation to be issued in the Merger, (v) seeking or causing any material
diminution in the direct or indirect benefits expected to be derived by
Parent a result of the transactions contemplated by this Agreement, (vi)
invalidating or rendering unenforceable any material provision of this
Agreement (including without limitation any of the exhibits or attachments
hereto) or the Letter of Intent, (vii) which otherwise might materially
adversely affect the Company and the Subsidiaries or Parent and its
subsidiaries, or (viii) otherwise relating to the Letter of Intent or the
Merger;
(f) there shall not be any action taken, or any injunction issued, or
any order, statute, rule or regulation proposed, enacted, promulgated,
issued or deemed applicable to the Merger by any federal, state or foreign
court, government or governmental authority or agency, which may, directly
or indirectly, result in any of the consequences referred to in (e) above;
(g) there shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National
Market, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by
United States authorities on the extension of credit by lending
40
institutions, (iii) a commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation by any governmental authority on, or any
other event which, in the sole judgment of Parent, might affect the
extension of credit by banks or other lending institutions in the United
States, or (v) in the case of any of the foregoing existing at the date
hereof, a material acceleration or worsening thereof;
(h) the Company shall have obtained each consent and approval
necessary in order that the Merger and the transactions contemplated herein
not constitute a breach or violation of, or result in a right of
termination or acceleration or any encumbrance on any of the Company's
assets pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit;
(i) there shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company or any of the
Subsidiaries, whether or not covered by insurance, which in the aggregate
has a material adverse effect on the Company, taken as a whole;
(j) the principal terms of this Agreement and the Merger shall have
been approved and adopted by the Company's shareholders in accordance with
all applicable laws and regulations and the Company's Articles of
Incorporation and Bylaws;
(k) no party hereto shall have terminated this Agreement as permitted
herein;
(l) Parent shall have completed its due diligence review of the
Company and its business, including but not limited to, the matters set
forth on the Company Disclosure Schedules, and shall in all respects be
satisfied (in its sole and absolute discretion) with the findings and
results thereof; and
(m) The Board of Directors of each of the Company and Parent shall
have approved this Agreement and the transactions contemplated hereby.
6.2 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the following conditions:
(a) the representations and warranties of Parent and the Merger Sub
set forth in Article 2 shall be true and correct in all material respects
as of the Effective Time as if made at and as of the Effective Time, and
Parent and the Merger Sub shall in all material respects have performed
each obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the Effective
Time. A representation or warranty that is expressly subject to a
materiality limitation shall not be subject to a further materiality
limitation as a result of the use of the phrase "in all material respects"
in the preceding sentence;
41
(b) Parent shall have furnished to the Company a certificate in which
Parent shall certify that Parent has no reason to believe that the
conditions set forth in Section 6.2(a) have not been fulfilled;
(c) Parent shall have furnished to the Company (i) a copy of the text
of the resolutions by which the corporate action on the part of Parent and
the Merger Sub necessary to approve this Agreement and the Merger were
taken, (iii) certificates executed on behalf of Parent and the Merger Sub
by their respective corporate secretaries or one of their respective
assistant corporate secretaries certifying to the Company, in each case,
that such copy is a true, correct and complete copy of such resolutions and
that such resolutions were duly adopted and have not been amended or
rescinded, and (iii) an incumbency certificate executed on behalf of Parent
and the Merger Sub by their respective corporate secretaries or one of
their respective assistant corporate secretaries certifying, in each case,
the signature and office of each officer executing this Agreement or any
other agreement, certificate or other instrument executed pursuant hereto;
(d) The Company shall not have discovered any fact or circumstance
existing as of the date of this Agreement which has not been publicly
disclosed by Parent as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise), results
of operations or prospects of Parent and its subsidiaries which is,
individually or in the aggregate with other such facts and circumstances,
materially adverse to Parent and its subsidiaries taken as a whole, or to
the value of the shares of Parent Common Stock.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT . The obligations of
Parent to effect the Merger are also subject to the following conditions:
(a) the representations and warranties of the Company set forth in
Article 3 of this Agreement shall be true and correct in all material
respects as of the Effective Time as if made at and as of the Effective
Time, and the Company shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Time. A
representation or warranty that is expressly subject to a materiality
limitation shall not be subject to a further materiality limitation as a
result of the use of the phrase "in all material respects" in the preceding
sentence;
(b) the Company shall have furnished to Parent a certificate, executed
by an appropriate executive officer, certifying that (A) an appropriate
inquiry has been made of the executive officers and employees of the
Company, and after completion of such inquiry, neither the Company nor any
of the individuals executing such certificate has any reason to believe
that the conditions set forth in Section 6.3(a) have not been fulfilled,
and (B) the representations and warranties made by the Company in this
Agreement are true and correct as of the Effective Time and that the
Company has complied with all of the covenants of the Company set forth in
this Agreement;
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(c) the Company shall have furnished to Parent (i) a copy of the text
of the resolutions by which the board of Directors and shareholders of the
Company approved this Agreement (including, without limitation, the plan of
merger contained herein) and the Merger; (ii) a certificate executed on
behalf of the Company by its corporate secretary certifying to Parent that
such copy is a true, correct and complete copy of such resolutions and that
such resolutions were duly adopted and have not been amended or rescinded;
and (iii) an incumbency certificate executed on behalf of the Company by
its corporate secretary certifying the signature and office of each officer
executing this Agreement or any other agreement, certificate or other
instrument executed pursuant hereto;
(d) Parent shall not have discovered any fact or circumstance existing
as of the date of this Agreement which has not been disclosed in writing to
Parent by the Company as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise), results
of operations or prospects of the Company which is, individually or in the
aggregate with other such facts and circumstances, materially adverse to
the Company taken as a whole, or to the value of the shares of Company
Common Stock;
(e) the Company shall not have received written objections to the
Merger pursuant to applicable Arizona Law covering more than 5% of the
shares of Company Common Stock outstanding immediately prior to the
Effective Time;
(f) M & I First American National Bank, the provider of debt financing
to Company (the "M&I LOAN"), or Joseph L. Simek if he elects to assume the
M&I Loan, shall have consented to the Merger and shall have agreed to
subordinate its security interest in the assets of the Company to Parent's
accounts receivable lenders;
(g) James Martin shall have entered into a Noncompetition Agreement in
the form of EXHIBIT "A" hereto;
(h) Parent shall be satisfied that the transactions contemplated
hereby may be accounted for as a pooling of interests;
(i) Any and all loans from the Company to any Shareholder or any
Affiliate of the Company shall have been repaid to the Company in full, and
documentation evidencing such repayment, in form and substance satisfactory
to Parent, shall have been delivered to Parent; and
(j) Any and all loans from any Shareholder to the Company, except for
that certain loan from M&I First American National Bank in the aggregate
amount of Four Hundred Thousand and no/100 Dollars ($400,000.00) that was
assumed by Joseph L. Simek in connection with the transactions contemplated
by this Agreement, shall have been extinguished in full or otherwise
satisfied in a manner satisfactory to Parent, and documentation evidencing
the same, in form and substance satisfactory to Parent, shall have been
delivered to Parent.
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ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. Subject to the provisions hereof, this Agreement may be
terminated prior to the Effective Time:
(a) by Parent, if there has been a material breach by the Company or
any of the Designated Persons of any covenant or agreement of the Company
or any of the Designated Persons set forth in this Agreement or in any
other agreement or instrument delivered to Parent, which breach has not
been cured within 30 days of the date on which written notice of such
breach was first given to the Company or which is not capable of being
cured by the Scheduled Closing Time;
(b) by the Company, if there has been a material breach by Parent of
any covenant or agreement of Parent in this Agreement, which breach has not
been cured within 30 days of the date on which written notice of such
breach was first given to Parent or which is not capable of being cured by
the Scheduled Closing Time;
(c) by Parent, if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6.1 or 6.3 by the
Scheduled Closing Time has become impossible (other than as a result of any
failure on the part of Parent or the Merger Sub to comply with or perform
any covenant or obligation of Parent or the Merger Sub set forth in this
Agreement);
(d) by the Company, if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 6.1 or 6.2 by the
Scheduled Closing Time has become impossible (other than as a result of any
failure on the part of the Company or any of the Designated Persons to
comply with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to Parent);
(e) by Parent, at or after the Scheduled Closing Time, if any
condition set forth in Section 6.1 or 6.3 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on the part
of Parent or the Merger Sub to comply with or perform any covenant or
obligation of Parent or the Merger Sub set forth in this Agreement);
(f) by the Company, at or after the Scheduled Closing Time, if any
condition set forth in Section 6.1 or 6.2 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on the part
of the Company or any of the Designated Persons to comply with or perform
any covenant or obligation set forth in this Agreement or in any other
agreement or instrument delivered to Parent);
44
(g) by Parent, if the Closing has not taken place on or before the
Final Date (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in
this Agreement);
(h) by the Company, if the Closing has not taken place on or before
the Final Date (other than as a failure on the part of the Company or any
of the Designated Persons to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent);
(i) by the mutual consent of Parent and the Company; or
(j) by Parent, if the Board of Directors of Parent or the Company
shall have failed to approve the transactions contemplated hereby or if
Parent shall have made the determination (in its sole and absolute
discretion) that the findings and results of its due diligence
investigation are unsatisfactory.
As used herein, the Final Date shall be April 30, 2001, except that if a
temporary, preliminary or permanent injunction or other order by any Federal or
state court that would prohibit or otherwise restrain consummation of the Merger
shall have been issued and shall remain in effect on April 30, 2001, and such
injunction shall not have become final and nonappealable, either party, by
giving the other written notice thereof on or prior to April 30, 2001, may
extend the time for consummation of the Merger up to and including the earlier
of the date such injunction shall become final and nonappealable or June 30,
2001, so long as such party shall, at its own expense, use its best efforts to
have such injunction dissolved.
7.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 7.1(a), Section 7.1(c), Section 7.1(e) or Section 7.1(g),
Parent shall deliver to the Company a written notice stating that Parent is
terminating this Agreement and setting forth a brief description of the basis on
which Parent is terminating this Agreement. If the Company wishes to terminate
this Agreement pursuant to Section 7.1(b), Section 7.1(d), Section 7.1(f) or
Section 7.1(h), the Company shall deliver to Parent a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate. If this Agreement is terminated pursuant to Section 7.1 as a result
of the inaccuracy of any representation or warranty of Parent or the Merger Sub
or set forth in Article 2 or the inaccuracy of any representation or warranty of
the Company set forth in Article 3, the party making such inaccurate
representation or warranty shall be subject to liability for the termination of
this Agreement as a result thereof only if and to the extent that any
Responsible Officer (as defined below) of such party had actual knowledge of
such inaccuracy. For purposes hereof, "RESPONSIBLE OFFICER" of any party shall
mean the chairman of the board of directors, the chief executive officer, the
chief operating officer, the chief financial officer, any executive vice
president, the treasurer or the secretary of such party.
45
ARTICLE 8
GENERAL PROVISIONS
8.1 AMENDMENT. This Agreement may not be amended except by an instrument in
writing approved by the parties to this Agreement and signed on behalf of each
of the parties hereto; provided, however, that, after approval of the Merger by
the Shareholders of the Company, no amendment may be made which changes the
amount into which each share of Company Common Stock will be converted in the
Merger or effects any change which would materially and adversely affect the
shareholders of the Company without the further approval of the shareholders of
the Company.
8.2 WAIVER. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the agreement of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit. No failure on the part of any party hereto to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party hereto in exercising any power, right, privilege or remedy under this
agreement, shall operate as a waiver of such power, right, privilege or remedy,
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or future exercise thereof or of any other power,
right, privilege or remedy. No party hereto shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it was given.
8.3 PUBLIC STATEMENTS. Except as required by applicable law, no party shall
make any public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of the other parties,
which approval will not be unreasonably withheld. Moreover, each party agrees to
consult with the other parties prior to issuing any such public announcement or
statement.
8.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by telex, by
telecopier, or by registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
If to Parent or the Merger Sub: Vitrix, Inc.
51 West Third Street
Suite 310
Tempe, Arizona 85281
Telecopy: (480) 967-5444
E-Mail: Tomb@Vitrix.com or Craigs@Vitrix.com
Attn.: Chief Executive Officer and
Chief Financial Officer
46
With a copy to: Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue
Suite 2700
Phoenix, Arizona 85004-4498
Telecopy: (602) 253-8129
E-Mail: GHALL@SSD.COM
Attn.: Gregory R. Hall, Esq.
If to the Company: Mallery & Zimmerman
101 Grand Avenue
P.O. Box 479
Wausau, Wisconsin 54402
Attn.: Robert W. Zimmerman
All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if delivered by mail; when
answered back, if telexed; and when receipt acknowledged, if telecopied.
8.5 INTERPRETATION. When a reference is made in this Agreement to
subsidiaries of Parent, the word "subsidiary" means any "majority-owned
subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of Parent;
provided, however, that the Company shall in no event and at no time be
considered a subsidiary of Parent for purposes of this Agreement. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References to
Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," and words of like import, unless the context requires
otherwise, refer to this Agreement (including the exhibits and attachments
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.
8.6 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
8.7 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (b) is not
intended to confer upon any other person any rights or remedies hereunder; (c)
shall not be assigned by operation of law or otherwise, except that Parent and
47
the Merger Sub may assign all or any portion of its rights under this Agreement
to any wholly owned subsidiary, but no such assignment shall relieve Parent and
the Merger Sub of their obligations hereunder, and except that this Agreement
may be assigned by operation of law to any corporation with or into which Parent
may be merged; and (d) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of Nevada, without
giving effect to any principles of conflict of laws or choice of law.
8.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties set forth in this Agreement shall survive the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, regardless of any investigation, inquiry or examination
made for or on behalf of or any knowledge of Parent, the Company or any
Shareholder or any of their respective Affiliates, officers, directors,
employees, agents, or representatives or the acceptance by any of them of any
certificate or opinion for the applicable period of time set forth in the
following sentences. Any representations, warranties or portions thereof the
breach of or misrepresentation with respect to which would be expected to be
encountered or discerned in Parent's audit of the financial statements
containing combined operations of Parent and the Company for the fiscal year in
which the Closing occurs shall survive until the date Parent's independent
certified public accountants issue their final report and opinion on such audit.
Except as provided in Section 5.12(c)(3), any other representations, warranties
or portions thereof shall survive for a period of one year after Closing. The
covenants set forth in Sections 5.12(a) and 5.12(b) shall for purposes of this
Section 8.8 be deemed a representation and warranty and shall be subject to the
applicable survival periods described above.
8.9 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement among the parties and supercedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the confidentiality provision
of the Letter of Intent, which should survive the execution and delivery of this
Agreement and (b) except as provided in Section 5.12, is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
The parties acknowledge that no party shall have the right to acquire or shall
be deemed to have acquired shares of common stock of the other party pursuant to
the Merger until consummation thereof.
8.10 FAX SIGNATURES This Agreement and any other document or instrument
relating hereto may be executed by a party's signature transmitted by facsimile
("FAX"), and copies of this Agreement and any such document or instrument
executed and delivered by means of faxed signatures shall have the same force
and effect as copies hereof executed and delivered with original signatures. All
parties hereto may rely upon faxed signatures as if such signatures were
originals. Any party executing and delivering this Agreement and any such
document or instrument by fax shall promptly thereafter deliver a counterpart
signature page of this Agreement and the fully executed original or counterpart
original of any such document or instrument containing said party's original
signature. All parties hereto agree that a faxed signature may be introduced
into evidence in any proceeding arising out of or related to this Agreement or
any such document or instrument as if it were an original signature.
48
SIGNATURE PAGE
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
VITRIX, INC.
By: /s/ Thomas S. Bednarik
--------------------------------------------
Name: Thomas S. Bednarik
Title: President and Chief Executive Officer
VITRIX INCORPORATED
By: /s/ Thomas S. Bednarik
--------------------------------------------
Name: Thomas S. Bednarik
Title: President and Chief Executive Officer
TIME AMERICA, INC.
By:
--------------------------------------------
Name:
Title:
SHAREHOLDERS:
/s/ Joseph L. Simek
------------------------------------------------
Joseph L. Simek
/s/ Robert W. Zimmerman
------------------------------------------------
Robert W. Zimmerman
/s/ Stephen C. Anderson
------------------------------------------------
Stephen C. Anderson
/s/ Carol Cover
------------------------------------------------
Carol Cover
/s/ James Martin, Sr.
------------------------------------------------
James Martin, Sr.
49